Why is it important to understand finances during a divorce?

Divorce is a Court process that legally ends a marriage. By the fact of the marriage both of you will have financial claims against each other’s income, property, assets and pensions. The only way these reciprocal financial claims can be finalised and dismissed is to have a Financial Order approved by the Court. Without that Financial Order all financial claims remain open for years even after the pronouncement of the Final Divorce Order. It is therefore vital that the matrimonial finances are sorted at the same time as the divorce and that they are not left open ended.

So what is required to sort the finances upon divorce?

1. Exchange financial information. It is important that you both have a full understanding of the financial position between the two of you; that way you can make informed decisions based on relevant information. Exchanging financial information on a voluntary basis helps keep legal costs down and allows discussions to happen without the need for formal financial Court proceedings.
2. Examine all of the assets. Whilst your matrimonial home is an integral part of the discussions you must not forget that there are other valuable assets such as pensions. Indeed, pensions can often be the most valuable asset in a marriage. Pensions are complex and need to be handled with care – a particular specialism of our team of family law experts. One difficulty with pensions is that they are not liquid cash and are tied up to be a future income stream. Expert legal advice is essential to consider your financial position now and in the future upon your retirement.
3. Consider all forms of discussion and negotiation. Going to Court to sort out your finances should not be the first port of call. It is much better to reach an agreement with between you regarding your finances, whether in mediation, through solicitors or sitting round the table discussing matters. This will be a much cheaper option for you and puts you in control of the decisions you make. Our experts are specialists in securing financial settlements through negotiation.
4. Be open and honest. It is important to provide full and frank information about your finances. Withholding information is a ground to re-open and re-examine matters later on, which no-one would want. Similarly, you should not try and sell or dispose of assets before or during any divorce proceedings.
5. Document the financial agreement reached. Whilst the pronouncement of the Final Order in the divorce proceedings legally ends your marriage it does not end your reciprocal financial claims against each other. It is vital that any financial agreement reached between you and your spouse is properly drawn up into an Order and approved by the Court. This is the only way to achieve a financial clean break and ensure that no further financial claims can be made in the future. Expert legal advice should be sought on drafting this vital document because once approved by the Court it is binding and you need to ensure it is correct and properly reflects the financial settlement reached.