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Financial consent orders on divorce – do I need one?
The short answer to this question is very likely to be yes! To help you decide what action you may need to take, let’s get behind the jargon and take a look at what a financial consent order is and how it can provide you with certainty and peace of mind for the future.
What is a financial consent order?
A financial consent order is a document that sets out the financial agreement a divorcing couple or couple dissolving a civil partnership has reached. It is only valid if it has been drawn up correctly and has been approved and stamped by the family court. The contents of the document will vary to reflect the individual couple’s financial circumstances and the nature of their agreement. For example, it could provide for the family home to be sold and define what share of the proceeds each party will receive. It might simply say that neither party has any further financial claim against the other’s income and assets. Alternatively, the financial consent order could be a lengthy document dealing with the payment of maintenance, multiple family trusts or the transfer of shares in a family business.
What is a clean break?
A clean break is a financial settlement upon divorce where neither party has any ongoing financial obligation to the other. The clean break can kick in after certain actions have been taken (e.g. after a property has been transferred or certain payments have been made) or immediately, depending on the situation.
My spouse and I have agreed to go our separate ways. We don’t have any joint assets and are on good terms. Do we need a financial consent order?
Yes. Anyone who gets divorced or dissolves their civil partnership becomes entitled, in principle, to make financial claims against their spouse or civil partner. What would ultimately happen if a claim were made would depend on a whole host of considerations. However, those claims remain ‘live’ forever. A simple consent order drafted by a solicitor and approved by the court can change this and ensure that any financial ‘loose ends’ will not cause trouble in future.
Life is unpredictable and the unexpected can happen. Couples who divorce but do not enter into a financial consent order could find themselves in difficulty years or even decades later because of the uncertainty caused by not dealing properly with the financial aspects of their split.
Indeed, there was a lot of news coverage about the 2015 Supreme Court case involving Dale Vince and Kathleen Wyatt. The couple were virtually penniless when they divorced and no financial consent order was approved by the court. Mr Vince, who started out as a New Age traveller, had built up a multi-million pound sustainable energy business. The Supreme Court confirmed Ms Wyatt’s right to make some sort of financial claim against him, 30 years after their split. This is an extreme case, but it underlines the fact that financial claims upon divorce never disappear unless a financial order is in place. Few people become multi-millionaires, but very many will build up pensions, savings and equity in property as they go through life, which could become vulnerable to claims by a former spouse if things are not dealt with properly at the point of divorce.
I am going to stay in the family home and buy my wife out. The bank has approved my application to take over the mortgage and we are ready to go ahead with the transfer. Surely a financial consent order isn’t needed?
This situation is common and is one where a consent order is very important. Even after ownership of the house has been transferred, a couple’s financial claims against each other do not come to an end. A consent order recording the agreement to transfer the house to one party in exchange for a payment to the other would bring such claims to an end and ensure that the clean break they both want remains a reality.
The number of people declared bankrupt in Britain each year is around the 100,000 mark. If you have stayed in the family home and bought out your spouse and they later become bankrupt, you could be forced to make payments towards the bankruptcy or even have to sell the property. A consent order entered into at the time of the divorce is the best legal protection against this happening and represents a worthwhile investment.
I would like to get a financial consent order but I don’t want to go to court. My partner and I have agreed everything and don’t want to have to stand in front of a judge.
If a financial agreement has been reached, then there is no need for the court to become actively involved. The court’s role is limited to reading through a copy of the financial consent order alongside a short form giving very brief details of you and your partner’s financial situation. Provided the order has been drafted correctly and your agreement is reasonably fair, it will be stamped and become binding as soon as your divorce is finalised.
We can’t agree anything at the moment. What should we do?
Even if you and your partner are finding it difficult to reach an agreement face to face, there are many alternatives to help you sort things out. One option is to attend mediation. Provided the agreement you reach is later set out in the form of a financial consent order, this could be a good way to achieve a settlement and ensure it is legally binding. Negotiations can also be undertaken via solicitors by letter or through various kinds of settlement meeting, and the process can be tailored to suit the individual dynamics of the situation. As long as any agreement reached is turned into a financial consent order then it’s up to you how you get there.