Ten reasons why it remains important to deal with your matrimonial finances
Ten reasons why it remains important to deal with your matrimonial finances, despite the Covid-19 pandemic.
The Covid-19 pandemic has caused great disruption to daily life and huge economic uncertainty. As we know, despite this, life does not stop. If you are going through or embarking upon divorce, it remains imperative that you deal with your matrimonial finances formally alongside your divorce, despite the current situation.
There are many reasons why this is so. There is a common belief that when you divorce, your Decree Absolute ends your financial ties with your spouse. This is not the case. Unless you reach a formal agreement with your spouse regarding the finances, your financial claims against the other remain open. What this means is that your spouse could ask you for money at any point in the future if you do not deal with your finances alongside the divorce. So even though the future may now seem less certain, if you are able to reach an agreement with your spouse now, this could help to limit future financial worries.
Furthermore, re-marriage also affects your ability to bring financial claims against your ex-spouse (sometimes causing a catastrophic result). This is another reason why it remains important to deal with the finances alongside your divorce before you move on with your life.
So how do I bring to an end the financial links with my spouse?
- If you reach an agreement with your spouse regarding the finances when you divorce, this can then be documented into a Financial Remedy Order which is often referred to as a “Consent Order”. This Consent Order deals with financial matters and records the terms of your financial agreement with your spouse. Once this is finalised it is sent to the Court to be approved. Once approved, you have a binding Order regarding the finances. Usually, at the end of the Order there is specific wording included which would bring your financial claims against each other to an end. This is known as the “clean break” aspect of the Order. What this wording says will depend on what you have agreed. A “clean break” means that you and your spouse cannot make any further financial claims against each other after the Order has been approved by the Court.
- A Financial Consent Order is usually drawn up by your solicitor after you and your spouse have exchanged what is called “full and frank financial disclosure”. This is because, in order to advise you, your solicitor would need to have an understanding as to the overall financial situation, often with reference to the “needs” of the parties. You would then be making an informed decision before reaching an agreement. Understandably, many people are concerned about how to value assets at present, given the impact of the pandemic on the economy. It is often necessary to obtain professional advice from accountants or actuaries and it may be that asset value is looked at from both a “pre-COVID” and “post-COVID” perspective, so to provide full information to the parties.
- There are other ways to reach an agreement with your spouse, for this to then be recorded within a Consent Order. In order to avoid dealing with your financial matter within Court Proceedings, you and your spouse could attend mediation sessions with an independent mediator to discuss financial matters. In the current situation, mediation appointments can be carried out virtually via video call. Your mediator would assist you to compile your financial disclosure and try to help you both reach an appropriate settlement. The mediator cannot, however, provide advice. Mediation would involve a series of sessions with your mediator who would record your eventual financial agreement into a non-binding agreement. You could then take this to your solicitor who could draft the agreement into the Consent Order.
- If you do not want to attend mediation or you do not want to complete and exchange financial disclosure with your spouse, your solicitor could simply draft the Consent Order based on the agreement you have reached with your spouse. Your solicitor would not, however, be able to advise you on the merits of your agreement if you simply wished this to be recorded and sent to the Court. The financial Consent Order does need to be drafted by a lawyer as it includes specific wording and follows a set format.
- When the Consent Order is sent to the Court for approval, it is also accompanied by a form known as a Statement of Information. This provides the Judge with an overview of the financial position for both you and your spouse. The Court requires this so that on the face of it, the Judge can check whether the Order looks fair, before deciding whether to approve this.
- Once the Order has been approved by the Judge, this is binding, and if there is any breach of the Order (for example if your spouse does not pay you an agreed sum of money) you can apply to the Court to enforce the Order.
- The Court considers that it is very important to try to maintain the “finality” of any Order that has been made. It is very difficult to return to the Court to challenge any Order that has been made. There are, however, certain circumstances where this can happen such as if there has been an error or your spouse has provided incorrect or inaccurate information. Many people have questioned whether the effect of the Covid-19 pandemic could justify an application to return to the Court, asking that your financial Order be reconsidered. It is too soon to be able to provide clear guidance on this and it would be dependent on individual circumstances. It remains that any such application would be difficult, given the Court’s approach when being asked to reconsider a previous Order.
- In some limited circumstances, it is possible to make an application to change the terms of the Order (“vary” the Order) or appeal the Order, if you can demonstrate to the Court that there is a good reason to do so. The Court would require evidence and a clear reason as to why the Consent Order should be altered. You must take legal advice before doing so as these applications are often complicated and in certain circumstances, you could be asked to pay the other party’s costs if the Court disagrees with your application.
- The Financial Consent Order can only be sent to the Court after you have reached the first stage of the divorce, the Decree Nisi. It is not therefore possible to obtain a Consent Order without also divorcing. If you do not wish to divorce, but wish to record your agreement, there are other options such as obtaining a Separation Agreement, which is a contract with your spouse, recording the terms of your separation. Although this is not binding in the same way as a Consent Order would be, this would allow you to set out your agreement in writing after you separate.
- How much will it cost? There is a Court fee of £50.00 (current as of June 2020) when the Order is sent to the Court for approval with the Statement of Information form. There are options available with regard to your legal fees and in some cases, fixed fees can apply, which you can discuss with your solicitor.
It seems that the pandemic is likely to impact the economy for years to come. Therefore, waiting to finalise your matrimonial finances given the current circumstances may be counter-productive and could significantly affect your financial future.
The Family Team at Ashtons Legal offers an initial consultation by telephone, FaceTime, Skype or WhatsApp. We would be happy to help you.
This information is correct at 12.30pm on 26 March 2020.
How can we help?
If you have an enquiry or you would like to find out more about our services, why not contact us?