Financial orders

Financial orders

Contents

What is a financial order?

When you apply for a divorce or dissolution, some form of financial arrangement will usually be needed to settle financial and property matters. This process is known as 'a financial order application'.

Whether or not you want to make any financial order claims against your spouse or partner, you must get a consent order dismissing any financial order claims that either of you might have against the other. If you don't do this, one of you could bring a financial order claim against the other many years after the divorce or dissolution is finalised. There is no time limit for a financial order claim. The fact that you might not have any assets or income now doesn't mean that you can't gain assets or income in the future. If that should happen, and you haven't got a consent order, your ex-spouse or ex-partner will always be able to make a financial order claim against you, even if you gained those assets or income long after the divorce or dissolution.

When you can't apply for a financial order

You can't apply for a financial order if you have remarried or registered a new civil partnership, although you can continue with an application made before your remarriage or new civil partnership. You can apply after, or at the same time as, issuing the petition. However, the court will only consider your application after, or at the time of, granting the decree nisi or conditional order. On the other hand, an application for interim financial provision, which covers the period prior to the decree nisi or conditional order until the decree absolute or final order is granted is considered before.

Types of financial orders a court can make

Maintenance pending suit/outcome of proceedings

This is an interim maintenance order. This requires one party to make regular payments to the other while their overall finances are being resolved in a formal application. This interim order takes effect from the date specified and ends on the date of the decree absolute or final order.

Legal services order

With this the court may order your spouse or civil partner to make payment to you for your legal costs. The court will only do so if it is satisfied that without the funds you will not be able to afford appropriate legal services.

Maintenance payments between spouses or civil partners

This order requires one party to make regular payments to the other either for a fixed period or on an ongoing basis. The receiving party can apply to extend a fixed period maintenance order as long as that application is made before the expiry date. If there is a significant change in either party's circumstances, they can apply to increase or reduce the maintenance amount. The maintenance order will usually come into effect on the date of the decree absolute or final order. It will end if the receiving party remarries or enters into a new civil partnership, or when either party dies. If there is a risk that the paying party will not keep up with the payments, they can be ordered to provide an asset (e.g. an investment account or rental property) that will either itself fund the regular payments or can be sold to provide the funds. A deed of security will set out the rights which the payee has in respect of the securing asset. If the court orders secured periodical payments, they will not necessarily end if the paying party dies.

Payment of lump sums of money

The court can grant an order for one of the parties to pay the other a lump sum, either as a single payment or in instalments. This lump sum payment can be for the other party's benefit or for the benefit of any child. The court will take into account the available financial resources as well as the needs of each party and any children.

Property adjustment orders

The court could make the following orders with regard to any property that is owned by either party, or in which they have a financial interest:

  • To sell the property, to fund the payment of a lump sum, for the benefit of either or both parties or any children of the family.
  • To transfer the property into the name of one party, a child of the family or another person for the benefit of any child, either permanently or for a period (e.g. until the youngest child turns 18). The property will then be sold and the proceeds shared or the property will revert back.
  • To settle the property on trust for the benefit of one of the parties and/or any children of the family.
  • To vary any ante-nuptial and post-nuptial settlements made in contemplation or as a result of the marriage or civil partnership. The variation order could reduce or even extinguish the interest of either party in the property.

The court can make these orders with regards to any assets such as real property, personal property, investments, insurance policies, a business, etc.

A sale or transfer of property can have Capital Gains Tax implications so you may want to seek financial advice.

Compensation for the loss of pension rights and other pension orders

The court may make sharing or attachment orders for pensions and Pension Protection Fund compensation entitlements. See our more detailed discussion of the issues relevant to pensions, below.

Child support maintenance

The court can, during financial remedy proceedings forming part of a divorce or dissolution application, make a periodical payments order for the maintenance of a child on the terms of a written agreement made between the child's parents. During the first 12 months of a child maintenance order neither party can approach the Child Maintenance Service for a calculation of child maintenance. If an increase or decrease of the child maintenance is sought during that time, an application to court will have to be made.

The court has only limited rights to make periodical payments orders for the maintenance of any children. In all other instances, you will have to either make your own arrangements, with or without the Government's free 'Direct Pay' online system, or approach the Child Maintenance Service to get child maintenance from a non-resident parent. See our section on Children for more information.

Factors the court considers

The aim of the courts is to deal with cases justly and fairly.

The court calculates the total current and future financial assets and resources available to the parties. Included in the calculation are both assets obtained during the marriage or civil partnership ('matrimonial assets') and assets brought into it ('non-matrimonial assets'). Overall, the court is more inclined to take non-matrimonial assets into account to meet the financial needs of the other party than it is when deciding on how the assets should be fairly divided between them.

The court then considers the financial needs, obligations and responsibilities of each party and whether such needs can be met by the available financial resources.

In doing this, the court considers the following factors:

  • The welfare of any children of the marriage or civil partnership
  • The financial resources that each party has or is likely to have in the foreseeable future
  • The standard of living enjoyed during the marriage or civil partnership
  • The ages of the parties and the length of the marriage or civil partnership
  • Any physical or mental disability of either party
  • The contributions made (or likely to be made) by each party to the welfare of the family (including non-financial ones, such as looking after children)
  • The value of any benefit (such as a pension) that one party will lose the chance to acquire*
  • The conduct of the parties, but only if it would be unjust to disregard it

The court then decides how the balance of available financial recourses should be shared, with the basic principle being that of equality between the 2 parties. In most cases, however, it's not possible to keep 2 households at the same standard of living as was enjoyed during the marriage or civil partnership.

As an ideal, the court aims to achieve an immediate or delayed 'clean break'*. This means that any financial dependency between both parties will end as soon as possible after the final order has been obtained. This may be appropriate if both parties are financially self-sufficient or where financial resources are so limited that ongoing maintenance is unworkable.

*If you are reading this section in relation to getting a judicial separation (marriages) or separation (civil partnerships), no clean break order or pension sharing order will be available.

The family home

Meaning of legal and beneficial ownership

The legal owner is the person named as the owner on the registered title or title deeds of the property. Legal ownership can be held by one person or by up to 4 people as joint tenants. Legal ownership does not reflect who is entitled to enjoy and benefit from the property ('beneficial interest'). Legal owners ('trustees') hold property on trust ('trust of land') for the benefit of beneficial owners. There is no trust of land if a single person owns both the legal and the beneficial interest.

The beneficial interest can be held by one person or more. If held by more than one, it can be as joint tenants or as tenants in common. Tenants in common own the beneficial interest in the property in set percentages, while joint tenants each have equal rights to the whole of the beneficial interest in the property.

Tenants in common can use a Will to decide what happens to their share after their death, but a joint tenant cannot because the other joint tenant will automatically become entitled to the whole legal ownership and/or beneficial interest.

A person can be the legal owner of a property without having any beneficial interest in it. A person might also have a beneficial interest in a property without being a legal owner. A person with a beneficial interest may have a right to occupy the property, may be able to prevent the sale of the property and will be entitled to share in the proceeds when it is sold.

If there is no written and signed declaration or formal trust deed setting out the beneficial interest, the court can, in the event of a dispute, consider the contributions made by the person claiming a beneficial interest and the intentions of the couple when the property was purchased.

Orders the court can make where you own the family home

The family home is often the largest asset that the court could take into consideration.

The court could order the following:

  • The outright transfer of the property into your name. This could mean that after the transfer your spouse or civil partner would have no beneficial interest in it.
  • The transfer of the property into your name, subject to you making a specified payment to your spouse or civil partner (i.e. you 'buy' their share of the family home).

If your property is subject to a mortgage, the mortgagee will have to be advised of these orders. If the mortgagee objects to your spouse or civil partner being released from their obligations under the mortgage, the transfer can still proceed, but they would remain liable for the repayment of the mortgage. In this case, you might have to give your spouse or civil partner an undertaking that you will pay the mortgage instalments. Also, you might have to give them an indemnity to protect them against any damage that they may suffer as a result of your default.

Mesher order

Where there are children involved, the court will often try to preserve the family home for the children and the parent with whom they will live. In this case, the court could make a 'Mesher' order where your family home is retained in both of your names, but stays in sole possession of the parent with whom the children will live. This remains the case until the youngest child has reached a certain age, at which point the property is sold and the net proceeds divided between you and your spouse or civil partner.

With this order it is also necessary to determine which of you will be responsible for paying the mortgage instalments and interest, rates and taxes, and the costs involved in the maintenance of the property until it is eventually sold.

Martin order

Similar to the Mesher order, the court could make a 'Martin' order where you could live in the property until you die, get remarried, enter into a new civil partnership or decide that you no longer wish to live there. When any of these events occur, the property will then have to be sold and the net proceeds divided between you (your estate if you've died) and your spouse or civil partner.

Sale of the family home

The court can only make an order for the sale of the family home where it does so in conjunction with one of the following orders:

  • A lump sum payment
  • Secured periodical payments
  • Transfer of property

Where a court does order the sale of a property it will also usually specify how the sale will be conducted, what minimum price the property will be sold for and how the net proceeds will be divided.

Orders the court can make where you do not own the family home

If you live in council or housing association property under a tenancy or in privately owned property under a private tenancy, the court may be able to order the transfer of the tenancy. This is possible where there is no provision in the tenancy agreement or in any statute that specifically prevents such a transfer. A contractual tenancy is, for the purposes of a property adjustment order, seen as 'property', just as a family home is. A transfer could also be ordered under the Family Law Act. However, if you do wish to seek an order for the transfer of a tenancy, it may be best to obtain legal assistance beforehand.

Pensions

Disclosing pension rights

You need to give the court and your spouse or civil partner details of all your pension rights, including any relating to your present or previous job, and any resulting from membership of a personal pension scheme.

You can usually get details of your pension by:

  • Writing to the pension arrangement(s) to get the Cash Equivalent Value.
  • Writing to the Pension Protection Fund (PPF) Board, where applicable, to obtain a valuation of the PPF entitlement.
  • Submitting BR20 to the Department for Work and Pensions (DWP) to get a capital valuation of the rights to an Additional State Pension or Protected Payment portion of the State Pension. (You may also find it useful to request a forecast of the benefit to be paid by filling in form BR19.)

You need to do this even if there is no claim for a pension-related order. You can use your annual valuation provided by your pension scheme if it is no more than a year old.

If you are unsure of the details of your pension scheme you can contact The Pensions Regulator.

The PPF

The PPF provides protection to all members of private-sector defined-benefit pension schemes where the employer sponsoring the pension scheme becomes insolvent and cannot honour its obligations. Where the PPF has taken responsibility for a pension arrangement, the member becomes entitled to pension compensation. See the PPF website for more information.

Pension-related orders

Pension attachment order

This earmarks a percentage of one party's pension and/or lump sum payment on retirement or on death. This is paid to the other party when payment becomes due.

Pension sharing order

This requires a percentage of the current value of one party's pension fund or the sharable portion of the State Pension (see discussion below) to be credited to the other party. In effect, one party receives a pension fund in their own right, which is carved out of the other party's existing pension fund.*

If you reached State Pension age before 6 April 2016, your State Pension is made up of:

  • Basic State Pension
  • Additional State Pension
  • Graduated State Pension (also known as Shared Additional State Pension). This is dependent on you having an old state pension scheme credit as this would be a life-long entitlement.

In these circumstances, on divorce, irrespective of the date of issuing the divorce petition, the Additional State Pension and, if it exists, the Shared Additional State Pension are shareable, while the Basic State Pension is not.

If you reach State Pension age after 6 April 2016, your State Pension will be a single Flat Rate State Pension (FRSP) and, if you're entitled to it, a Protected Payment element. The Protected Payment element exists if you are entitled on 6 April 2016 to an amount of Additional State Pension (based on your pre-6 April 2016 contributions) that is higher than the FRSP amount. The Protected Payment element is known as the 'excess amount' and it is this excess amount that is shareable on divorce.

The share order will specify the 'shared weekly amount', although the Department of Work and Pensions will provide a capitalised amount to help the court. The shared weekly amount represents a percentage of the excess amount. The Protected Payment is increased each year by price inflation but it can't increase by National Insurance (NI) contributions. The FRSP is limited for 2016/17 to a maximum amount of £155.65 per week, but to qualify for that maximum, 35 years of NI contributions are required. There is also a minimum number of years contributing to NI required to qualify getting any portion of the FRSP. Any contribution to NI for less than the minimum number of years would result in no FRSP. The FRSP is not shareable on divorce.

However, even where the transferor reaches State Pension age after 6 April, the full Additional State Pension will remain shareable if the divorce or dissolution proceedings were issued before 6 April 2016, irrespective of the date the pension sharing order will take effect. If, however, in this case, the divorce or dissolution proceedings were issued after 6 April 2016, the sharing arrangements as set out here with regard to the shared weekly amount of State Pension will apply, which means the Protected Payment element, if it exists, will be shareable.

Pension compensation attachment order

This is the same as a pension attachment order, but for a pension compensation entitlement.

Pension compensation sharing order

This is the same as a pension sharing order, but for a pension compensation entitlement.*

Points to keep in mind

Some points to keep in mind when deciding to seek one of the above pension-related orders:

  • You will not be allowed to apply for a pension attachment or pension compensation attachment order after you re-marry or enter into a new civil partnership. You can seek a pension sharing or pension compensation sharing order.
  • Where you do get a pension attachment order, any resultant periodical payments will end on the date of your remarriage or new civil partnership registration. However, any resultant deferred lump sum will still need to be paid.
  • A pension attachment order is not available in relation to an Additional State Pension or the Protected Payments portion of the State Pension, but a pension sharing order may be available.
  • No orders are available in relation to a Basic State Pension.

*If you are reading this section in relation to getting a judicial separation (marriages) or separation (civil partnerships), you cannot apply for a pension sharing or PPF compensation sharing order.

Pre-application protocol

Pre-application protocol for Mediation, Information and Assessment

The Pre-application protocol is a series of steps that you must follow before you make an application for a financial remedy.

Before making your application, you must, except in limited instances, attend a Family Mediation, Information and Assessment Meeting (MIAM) with a mediator. At this meeting you will consider whether mediation is appropriate in your case.

The mediator will complete Form FM1 – 'Family Mediation, Information and Assessment Form' to show that you have attended the meeting.

If you both decide to try to settle through negotiation, the mediator will remain neutral and will not tell you what you should agree to. Mediation is a voluntary process. All discussions and agreements made during any meetings are confidential and will not be disclosed without your permission.

You do not need to attend a MIAM (although you would still need to complete Form FM1) if any of the following apply:

  • You are both in agreement about the financial order application.
  • The mediator is satisfied that your case is not suitable for mediation.
  • There is an allegation of domestic violence.
  • You don't know the address or whereabouts of your spouse or civil partner.
  • The social services are involved in your case due to their concerns for the protection of a child of the family.
  • You have contacted 3 mediators and none of them are able to have a meeting with you within the next 15 working days.
  • The intended application is regarded as urgent in terms of the protocol.

Pre-application protocol for disclosure

If you don't need to go through mediation, or if you have done so but cannot reach an agreement, you would usually need to write an amicable letter to your spouse or civil partner to ask if they are willing to exchange relevant financial information with you. You should suggest that you both use Form E (discussed in more detail later) as a guide to what information and documents would be reasonably expected. If this disclosure is full and frank, as is required by the protocol, it will allow for more fruitful negotiations. If you don't comply, the court will take it into account when deciding whether one of you should pay the other's costs.

Agreement about the financial order (undefended procedure)

The steps you need to take

If you both agree about the financial order, you can get a financial order by consent (a 'consent order') by completing 3 copies of the following documents:

  • Cover letter for application
  • Form A – 'Notice of [intention to proceed with] an application for a financial order'
  • The draft consent order
  • The relevant pension annex, as an attachment to the draft consent order, for each pension order sought.
  • Form D81 – 'Statement of information for a consent order in relation to a financial remedy'

Once completed, 2 copies of each must be given to the same court dealing with your divorce or dissolution (the third copy is for you to keep). You will also need to give the court a cheque for the court fee, unless you are exempt from paying

Cover letter to court for your application

You don't have to do this, but it can be helpful. You would also list all the documents and any court fee that you are enclosing with your application.

Form A – 'Notice of [intention to proceed with] an application for a financial order'

This form is used to show that you want to apply or continue with the application for a financial order, allowing you to show which orders you want. Even though you are applying for a consent order, this form must still be completed. Form A also includes sections relating to the requirement to attend a MIAM. In these sections you will indicate that you have reached an agreement with your spouse or civil partner and therefore do not need to attend a MIAM to consider mediation. You can complete this part yourself and sign the form.

The draft consent order

You and your spouse or civil partner should record in writing the agreement you have come to regarding your assets and how each of you and any children will be financially supported. This written agreement is called a 'draft consent order'. You can apply to court to make this an enforceable order of court.

You must ensure that your draft consent order is set out in simple and clear terms so that there is no possibility of a dispute arising later. You may wish to seek independent legal advice before applying.

The court will need 3 copies: one should be endorsed and signed by your spouse or civil partner (where you are the applicant), although it is usual for both of you to sign all 3 copies.

Form P – 'Pension inquiry form'/Form PPF – 'Pension compensation inquiry form'

These forms can be used to get information from each of your pension providers or the PPF Board. It is the information contained in Part C of these forms that you need to give your spouse or civil partner.

Form D81 – 'Statement of information for a consent order'

This form is a financial statement that you need to give each other. It documents the financial information that was disclosed at the time of drafting the consent order.

You can either each complete your own form and exchange copies for the other to sign, or you can complete and sign the same form. In either case, you must both sign the form before filing it with the draft consent order.

Pension annexes

If your draft consent order includes any pension or PPF compensation orders, any relevant pension annexes must be attached to the draft consent order:

  • Form P1 – 'Pension sharing annex'
  • Form P2 – 'Pension attachment annex'
  • Form PPF1 – 'Pension Protection Fund (PPF) sharing annex to a pension compensation sharing order'
  • Form PPF2 – 'Pension Protection Fund (PPF) attachment annex to a pension compensation attachment order'

Before seeking the consent order, you will need to send a copy of your application, the draft consent order and the relevant pension annexes to each pension arrangement and/or the PPF board. In the case of a pension attachment or PPF compensation attachment order, the person responsible for the pension arrangement or the PPF Board will have 21 days to object to the proposed order. The annexes will also be served on the pension arrangement or the PPF Board after the consent order has been obtained so that the order can be implemented.

Property-related orders

If your draft consent order includes a claim for a property-related order and that property is mortgaged, you will need to send a copy of the draft consent order to the mortgagee before seeking the consent order. The mortgagee has 14 days to file a statement in answer, if necessary. Similarly, where your draft consent order includes a claim for the variation of a settlement, all interested parties will need to be given a copy. These 'interested parties' could be, for example, the person who created the trust (the 'settlor'), the people administering the trust ('the trustees') and any beneficiaries. The judge might also indicate other people that Form A and the draft consent order should be served on.

Final steps

You can file the above documents at the same time as issuing your petition, or afterwards, but not before. If you do file your application later you must do so at the same court that is considering your petition.

If the court is satisfied with the draft consent order and all the affected parties have been given notice (and they have either not objected within the time limits allowed or the court has considered any objections made), it will make the draft consent an order of court. There is no need to be at the court on the day of the order, unless the court tells you otherwise.

No agreement about the financial order (defended procedure)

The steps you need to take

If you disagree about the financial order you will need to:

  • File Form A at the court where your petition was filed
  • If required, send copies of Form A to various entities

Form A – 'Notice of [intention to proceed with] an application for a financial order'

This form is used to show that you want to apply or continue with the application for a financial order, allowing you to show which orders you want. Form A includes sections relating to the requirement to attend a MIAM. You can complete this part yourself if an exception applies and you don't need to attend a MIAM. If no such exception applies, the form will need to be completed by the mediator at a MIAM.

Form C – 'Notice of a first appointment'

When the court receives your application (Form A), it will serve a copy of your application on your spouse or civil partner and give you both notice (Form C) of the date of the First Appointment. This date will be 12–16 weeks after you filed Form A at court.

Pension inquiry forms

Within 7 days of receiving Form C from the court, the party with any pension rights or PPF entitlements must get a valuation and any other relevant information. This information can be obtained by completing and sending either Form P – 'Pension inquiry form' or Form PPF – 'Pension Protection Fund (PPF) inquiry form' to the person responsible for the pension arrangement, or to the PPF Board. When you receive this information, you must give it to the other party within 7 days.

Form E – 'Financial statement'

Both you and your spouse or civil partner must exchange and file one of these at court at least 35 days before the first appointment.

This form is where you and your spouse or civil partner must disclose all of your financial resources, obligations and needs. You must give a full, frank and clear disclosure of all your financial and other relevant circumstances, otherwise the order that the court makes may be cancelled later. Furthermore, if you are found to have been deliberately untruthful, criminal proceedings can be brought against you for fraud.

Form E is a very lengthy and sometimes complicated form so you may want to obtain legal advice before completing it.

Further documents

No less than 14 days before the first appointment, the following documents should be filed at court and served on your spouse or civil partner:

  • Chronology

This is a chronological list of all the dates relevant to the matter.

  • Concise statement of issues

This lists the issues that are still unresolved between the 2 of you, along with each of your points of view on them.

  • Questionnaire

This is an important document as you can ask any question to clarify any issues contained in the 'Concise statement of issues'. If you do not have any questions, you will need to file and serve a confirmation of this fact both at court and on your spouse or civil partner.

  • A summary of the case agreed between the parties

This is a brief narrative summary of the essential facts of the case that have been agreed between you.

  • A schedule of assets agreed between the parties

Here you set out the assets and their total value as well as the value of both parties' interests in them. This is really a summary of what is in both of your Form Es. Where there is a difference of opinion about values or ownership, these should also be highlighted.

  • Details of the directions the parties are seeking, including any expert witnesses they wish to appoint

In this document you will set out which directions you want the court to rule on. If required, you will also seek permission from the court to allow expert witnesses to provide reports.

  • Form G – 'Notice of response to first appointment'

In this form you will inform the court whether, at the time of the first appointment, you can proceed with a Financial Dispute Resolution (FDR) appointment (see below). You would normally be able to do so if all your questions and queries about your spouse's or civil partner's financial situation have been fully answered.

  • Form H – 'Estimate of costs'

In addition to filing this at court 14 days before the first appointment, an updated version of this form must be provided at each appointment and every court hearing that follows. In each form, you will set out the estimated legal costs you have incurred up to the date of the relevant hearing or appointment.

At the first appointment

At the first appointment, the court decides the next step of the matter and, where required, will refer the matter for a 'financial dispute resolution' appointment. Where pension-related orders are requested, the court may also direct that the one with the pension rights should file and serve either Form P – 'Pension inquiry form' or Form PPF – 'Pension Protection Fund (PPF)'.

The financial dispute resolution appointment

This is intended to try to reach a settlement of the financial issues through discussion and negotiation. If the parties reach an agreement they will draw up a draft consent order and this will be made an order of court. If no settlement is reached, the matter is referred for a final hearing and the court will give directions as to the next steps.

Form H1 – 'Statement of costs'

You will need to provide this form at the final hearing. It is a summary of the final actual legal costs (if any) that you have incurred in the financial order proceedings. It also includes sections for estimated costs to the end of the final hearing and for estimated costs for implementing the financial order.

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