How to protect your finances after divorce
Published: 22nd November 2010
Unfortunately, marriages sometimes go wrong and a divorce becomes necessary.
There are two parts to a divorce - the divorce itself and also the financial arrangements of the parties.
Some separating couples choose, for whatever reason, not to come to a formal arrangement in relation to the finances of the marriage, and proceed only with the first part - the divorce. However, the second part - the finances of the marriage - are equally as important as the divorce.
Financial arrangements can be formalised in a court order, which provides a legally binding arrangement between the parties. In some cases a 'clean break' is the best solution for the parties involved, whereby the parties have no future financial obligations to one another, and cannot subsequently return to court to claim any financial provision from their ex-spouse. Therefore in the event of say, a lottery win, the ex-spouse cannot return to court to seek any of the winnings.
In a recent case, an ex-husband found himself in court after his ex-wife made a claim for a share in his euromillion lottery win. Mr and Mrs Page divorced in 2000, and have a daughter, now aged 13. After his lottery win of £56 million, his ex-wife sued him for a proportion of his winnings, and reportedly demanded £8 million. However, an out of court settlement was reached and a figure of £2 million was awarded to Mr Page's ex wife.
If at the time of the divorce, Mr and Mrs Page had had a court order as to their finances, which provided for a clean break between the parties; the former Mrs Page would not have been entitled to make a claim on Mr Page's lottery win.
PROCESS OF GETTING AN ORDER AND ITS PROTECTION
Court Orders in respect of matrimonial finances can be made on terms agreed by the parties (known as a Consent Order), or where the parties cannot agree, the Court can impose an Order.
A Consent Order can be made by the Court when financial issues are agreed by the parties to a divorce. The agreement between the parties is given legal effect by asking the court to make an Order by consent. If no Order is made, the financial ties and obligations of marriage will continue notwithstanding the marriage having been dissolved. This could result in a former spouse making financial claims long after the divorce, and on your estate after death.
To obtain a Consent Order both parties disclose their financial situations to each other, and an agreement as to the finances is negotiated between the parties. This agreement is then submitted to the court for approval, and once approved becomes a legally binding document. As well as submitting the agreement to the court, you must also send a statement of information on the parties financial circumstances and intentions following the divorce.
Alternatively where the parties cannot make an agreement, a judge can hear the arguments of both sides at a court hearing, and then decide upon a settlement that he feels is in the best interests of both parties, taking into account their needs and the needs of any children. This option however is more complicated and time consuming than having an agreement in place and the court approving by way of a Consent Order.
Both types of court Orders (if they provide for a clean break between the parties) will prevent an ex-spouse in the future from making a court application against you should your financial situation improve.
It should be noted that it is very difficult and sometimes impossible to bring a claim against your ex-spouse if you have remarried. If you have not remarried and want to bring a claim against your ex-spouse it will not affect your claim if they themselves have remarried.
A financial Order can be made at any time after decree nisi, however some parts of the Order, for example property adjustment or a lump sum payment cannot take effect until decree absolute.
In conclusion, whilst a Court Order as to the finances of the marriage may not seem necessary at the time of divorce, the need for one may arise in the future should the financial situation of either of the parties change. This could leave you facing a claim by an ex-partner as to a share in any financial gain you make. This could include getting a higher paid job, receiving an inheritance or winning the lottery etc.
In these matters, prevention is better than cure and it is important that you embody your financial arrangements in a Court Order at the earliest opportunity following decree nisi.
If you require further information on the above issue or any other family releated matter, please contact a member of our Family Law team on 01553 660033.