When dealing with a financial settlement after divorce, the court considers a wide range of factors to arrive at an outcome that is fair in all the circumstances. This stage of the divorce process can feel complex and emotionally difficult, as it involves decisions about property, finances and future financial security.

Among the matters the court will take into account are the ages of the parties and the length of the marriage or civil partnership. These factors can influence how assets are divided, how financial needs are assessed and how each party’s future earning capacity is viewed. Reaching a fair financial settlement requires careful consideration of these elements alongside the parties’ respective contributions and responsibilities.

The purpose of a divorce financial settlement is to put clear and workable financial arrangements in place for the future. This may include decisions about the family home, savings, investments and pensions, as well as responsibility for debts. In some cases, the settlement will also address spousal maintenance and child maintenance, so that the needs of any children are properly provided for.

Understanding how the court approaches financial settlements in divorce can help parties make informed decisions and avoid unnecessary disputes. With appropriate legal advice, it is often possible to reach an agreement that reflects the realities of the marriage and provides a stable financial foundation moving forward.

What Is a Financial Settlement in Divorce?

A financial settlement in divorce is the agreement that sets out how finances, assets and liabilities will be dealt with when a marriage or civil partnership ends. Its purpose is to resolve all financial claims between divorcing parties and provide certainty about each person’s financial position going forward.

A divorce financial settlement can cover a wide range of financial matters, including the division of matrimonial assets such as the family home, business interests, savings, investments and bank accounts. It may also address pensions, responsibility for debts, lump sum payments, spousal maintenance and child maintenance, depending on the circumstances.

Reaching a financial settlement helps to bring financial matters to a close and reduce the risk of future disputes. To be fully effective, the agreement must usually be recorded in a legally binding financial order, often called a consent order, which is approved by the family court as part of the divorce process.

Without a court-approved financial order, financial claims can remain open indefinitely, even years after divorce. For this reason, taking legal advice when negotiating a financial settlement after divorce is strongly advised, particularly where assets, pensions or ongoing financial support are involved.

What Factors Are Considered in a Financial Settlement?

Several factors are taken into account when determining a financial settlement after divorce. These are set out in law and applied by the court to reach a fair financial outcome based on the circumstances of each case. They include:

• Income and earning capacity: the current and future earning potential of both parties is considered, including employment income, bonuses, pensions and other financial resources.
• Financial needs and obligations: the court looks at each party’s financial needs, such as housing costs, everyday living expenses and childcare responsibilities.
• Standard of living during the marriage: the lifestyle enjoyed during the marriage is relevant, particularly in longer marriages, although it may not always be possible for both parties to maintain the same standard after divorce.
• Age and health: the age and health of each party can affect earning capacity and future financial security, especially where one party is approaching retirement or has health issues that limit their ability to work.
• Contributions to the marriage: both financial contributions and non-financial contributions, such as caring for children or running the household, are treated as equally valuable.
• Future financial assets: the court may take into account future financial resources, including anticipated earnings, pension benefits and, in some cases, inheritances, when assessing long-term financial stability.
• Conduct: in limited and exceptional circumstances, the conduct of one or both parties may be relevant, although this is not commonly relied upon.

The court’s task is not to apply a rigid formula, but to assess all relevant factors together in order to reach a fair financial settlement in divorce. What is fair will depend on the specific facts of the case, including the length of the marriage, the parties’ financial positions and their needs going forward.

Divorce After a Long Marriage

Divorce after a long marriage can raise particular issues when reaching a financial settlement. In many cases, the parties may be approaching retirement age, which means there is often a strong focus on pension provision and long-term financial security. With fewer remaining working years, there may be limited opportunity to rebuild savings or increase earning capacity.

The court may consider that a wife or husband in their fifties or sixties who has spent much of the marriage as a homemaker is unlikely to secure employment sufficient to support themselves following the divorce. At the same time, a party nearing retirement may not be in a position to pay spousal maintenance for an extended period. As a result, the division of capital, savings and investments often takes on increased importance.

After a long marriage, the court’s starting point when dividing matrimonial assets, including pensions, is usually equality. However, an equal division will not always produce a fair financial settlement. In particular, a strict 50/50 split may not meet the parties’ respective housing or income needs, especially where the available assets are limited.

People often ask what the courts mean by a “long” marriage. There is no fixed definition in legislation, and the courts do not formally categorise marriages as long or short. Each case is assessed on its own facts. That said, the court is far more likely to question whether equality is appropriate in a marriage lasting two years than in one lasting 20 years.

This does not mean that a 50/50 division would be inappropriate in all short marriages. Rather, in shorter marriages the court is more likely to examine where the assets originated and how they were acquired, whereas in a long marriage the source of assets is usually given less weight.

How Is Age Considered as a Factor?

Age plays a meaningful role in how a financial settlement in divorce is assessed. The court considers the ages of both parties to understand their position in the labour market, their stage of life, and their realistic prospects for future earning.

A younger spouse will often be viewed as having greater opportunity to rebuild financially after divorce. With more working years ahead, they may have increased scope to retrain, progress in their career or increase their earning capacity. As a result, the court may expect a younger party to achieve financial independence more quickly, which can affect the level and duration of financial support awarded.

By contrast, an older spouse may have more limited employment prospects, particularly if they are approaching retirement age or have experienced health issues. Where this is the case, the court may consider a greater share of matrimonial assets or spousal maintenance to provide longer-term financial security. This reflects the reduced ability to generate income in the future.

The court will also take account of career sacrifices made during the marriage. Where one party has stepped back from employment to care for children or support the household, this can have a lasting impact on earning capacity. Financial provision may reflect this by supporting retraining or recognising the disadvantage caused by time spent out of the workforce.

Overall, age affects both immediate financial needs and long-term stability. By weighing age alongside earning capacity, health and contributions to the marriage, the court seeks to achieve a fair financial settlement that supports both parties moving forward.

Dependent Children

When reaching a financial settlement after divorce, the court’s paramount consideration is the welfare of any dependent children. Their needs will take priority over all other factors and will strongly influence how assets and income are divided between the parents.

A key issue is housing. The court will seek to ensure that children have stable and appropriate accommodation, often aiming to allow them to remain in the family home or in accommodation of a similar standard. This can result in the parent with primary day-to-day care receiving a larger share of the available capital or being able to remain in the family home for a period of time. The intention is to minimise disruption to the children’s lives at a time of significant change.

The court will also consider the financial resources of each parent when assessing child-related costs. This includes everyday living expenses, childcare, school costs and healthcare. Where one parent has a substantially higher income or greater financial resources, they may be expected to contribute more towards meeting these needs, either through child maintenance or additional financial provision.

Future expenses are also relevant. The court may take into account anticipated costs such as school fees, extracurricular activities or higher education, particularly where these were part of family life before separation. Financial arrangements are often structured to preserve consistency and avoid a sharp decline in the children’s standard of living following divorce.

While the needs of children are the court’s first consideration, these issues are balanced alongside the parents’ own financial positions. The overall aim is to reach a fair financial settlement that supports the children’s upbringing while enabling both parents to meet their own reasonable needs.

The Impact of Premarital Cohabitation and Financial Settlements on Divorce

The relevant section of the Matrimonial Causes Act 1973 is section 25(2)(d). This refers explicitly to "the duration of the marriage" as a relevant factor in determining a financial settlement. However, when an extended period of cohabitation leads seamlessly into a marriage (or civil partnership), the period of cohabitation will 'count' towards the length of marriage.

To take an example, a couple may only have married three years prior to the divorce. On the face of it, this would seem like a short marriage. However, if they had lived together for a decade before their marriage, the court would look upon the marriage as having lasted for 13 years, and therefore a partnership in which the origins of the assets assume a lesser importance.

What if My Spouse and I Can't Agree on a Financial Settlement?

If you and your spouse cannot agree on a financial settlement, several options are available to help resolve the dispute:

• Mediation and negotiation: engaging in mediation with a neutral third party can help facilitate a mutually acceptable agreement.
• Collaborative law: this process involves both parties and their solicitors committing to resolving the issues without going to court.
• Court intervention: if other methods fail, either party can apply to the court for a financial remedy order. The court will then make a decision based on the evidence and circumstances presented during divorce proceedings.
• Potential outcomes: court intervention can result in a range of orders, including lump-sum payments, property adjustments and maintenance orders.

How Long Does It Take to Reach a Financial Settlement?

The time it takes to reach a financial settlement can vary widely depending on the complexity of the case and the level of agreement between the parties. Factors affecting the timeline include:

• Complexity of financial affairs: cases involving substantial assets or complicated financial arrangements take longer to resolve.
• Willingness to cooperate: the more both parties are willing to negotiate and disclose financial information, the quicker the process.
• Mediation vs court proceedings: mediation can often resolve issues more swiftly than court proceedings. On average, mediation might take a few months, while court proceedings can extend over a year or more.
• Financial disclosure: comprehensive and timely disclosure of finances by both parties is essential for a swift resolution.

Can a Financial Settlement Be Modified After Divorce?

In certain circumstances, a financial settlement can be modified after divorce. One of the primary factors considered is a material change in circumstances. If there is a significant change in either party's financial situation, such as a loss of employment or the onset of a serious illness, the court may be open to modifying the settlement. This ensures that the settlement remains fair and reflective of the current financial realities of both parties.

The process for modifying a financial settlement involves the party seeking the change applying to the court. They must demonstrate the material change in circumstances to justify the modification. The court will then review the new information and decide whether to adjust the settlement based on the presented evidence.

However, modifying a financial settlement can be challenging. Courts generally aim to finalise financial matters to provide certainty and closure for both parties. As such, only substantial changes are typically considered sufficient to warrant a modification. This limitation underscores the importance of ensuring the original settlement is as fair and comprehensive as possible.

What Is Financial Disclosure in a Divorce?

Financial disclosure is a critical component of the divorce process, ensuring that both parties have a clear and comprehensive understanding of each other's financial situations. This process involves the exchange of detailed information about all assets, liabilities, income and expenditures, allowing for a fair and equitable division of assets. Full transparency is essential to reach a just settlement, whether through negotiation, mediation or court proceedings.

During financial disclosure, each party is required to complete a Form E, a comprehensive document that outlines their financial circumstances. This form includes sections for listing properties, business interests, savings, investments, pensions, debts, and any other relevant financial interests. Additionally, it requires details of income from all sources, including employment, benefits and other streams of revenue. Accurate and thorough completion of this form is essential, as it forms the basis for discussions and decisions regarding the financial settlement.

The purpose of financial disclosure is to prevent any hidden assets or undisclosed debts that could unfairly influence the settlement. By ensuring both parties have access to the same financial information, the process promotes fairness, trust and the likelihood of a fair financial settlement. Incomplete or dishonest disclosure can lead to legal consequences, including the reopening of the settlement if significant assets are later discovered. This makes honesty and thoroughness in financial disclosure necessary for a lasting and fair agreement, from both a legal and practical perspective.

In addition to facilitating a fair division of assets, financial disclosure helps determine appropriate levels of spousal maintenance and child support. Understanding the full financial picture allows for realistic and sustainable financial arrangements that meet the needs of both parties and any children involved. It provides the foundation for decisions that will impact the financial wellbeing of the entire family post-divorce.

Ultimately, financial disclosure is about creating an open and transparent environment where both parties can negotiate in good faith. It is a vital step towards achieving a fair settlement that respects the contributions and needs of both parties, setting the stage for a financially stable future after divorce. Whether through mutual agreement or court intervention, comprehensive financial disclosure is the cornerstone of any equitable divorce settlement.