Divorce – Financial Settlement FAQ

Anyone involved in a divorce is likely to have unanswered questions about finances. Below are answers to some of the questions we are most frequently asked about divorce settlements and finances.

Click on a link to see the answer to that question or contact us if you have a question which is not listed.

Will we have to go to Court to reach a financial settlement in our divorce?
How is a divorce financial settlement arrived at?
What is a clean break financial settlement?
Am I entitled to maintenance from my ex-spouse after a divorce?
Who pays the legal fees for a divorce settlement?
What happens to the family home after a divorce?

Will we have to go to Court to reach a financial settlement in our divorce?

Not always. A financial settlement can be negotiated between the parties involved in the divorce, with the assistance of their solicitors, without the need to go to Court. This can help to minimise the legal fees incurred by both sides.

If an agreement is reached outside of Court it will then be checked by the Court to ensure that it is reasonable, and endorsed by them to make it a legally binding order.

The majority of divorce cases are agreed in this way.

If an agreement cannot be reached on finances, then it will be necessary to go to Court to achieve an agreement.

The risk of going to Court for a ruling is that a large degree of control is lost by both parties as to the eventual terms of the settlement.

How is a divorce financial settlement arrived at?

An agreement on finances can be reached either by negotiation between the parties and their solicitors, or through the Court process if necessary.

The negotiation of a financial settlement should take into account a number of factors, including:

Length of the marriage
The current earnings of each party
The potential future earning capacity of each party
The financial assets of each party (including pensions)
Children – their financial needs as well as other factors that may affect their future wellbeing
The standard of living the couple have enjoyed during the marriage
The financial contribution that each party has made to the marriage
Other contributions that each party has made to the marriage (non financial), for example, caring for the children and running the house

What is a clean break financial settlement?

A clean break financial settlement is where no ongoing financial commitments remain between the parties after the settlement.

Even in cases where ongoing spousal maintenance would normally be payable, a clean break can still be achieved if enough other financial assets exist to enable the party liable to pay maintenance to transfer a suitable amount to offset the future maintenance liability.

Am I entitled to maintenance from my ex-spouse after a divorce?

Entitlement to spousal maintenance depends on a number of factors, including:

The length of the marriage
The current earnings of each person
The potential future earning capacity of each person
The standard of living you enjoyed before the divorce
Your respective financial needs and the financial needs of any dependent children
The contribution made to the marriage, either financial or by caring for children and looking after the family home

As an example, a young couple with no children who have been married for a short time and are both working. In this case it may be fair for them both to leave the marriage with no ongoing financial ties and taking with them what they brought into the marriage.

An alternate example is of a couple have been married for 25 years and by mutual agreement the wife gave up her career to bring up the family at home. The husband therefore became the sole bread winner. The wife’s future earnings capability may have been severely compromised because of their agreement.

In these circumstances the wife should not be penalised for her lack of earnings ability and may be entitled to ongoing spousal maintenance.

Who pays the legal fees for a divorce settlement?

In the majority of cases, both parties will have their own solicitor and will be responsible for their own legal fees.

In some circumstances it may be possible to include the payment of legal fees as part of the financial settlement if this is included in the negotiations.

What happens to the family home after a divorce?

The family home will normally be an asset of the marriage and will therefore be included in the financial negotiations.

Divorce settlement negotiations always start from the point of an equal division of assets between the spouses. If one spouse wants to retain the family home they will need to have enough other financial assets to be able to offset the value of their partners share of the home by transferring assets of that value to their ex spouse.

If not financial enough assets are available to achieve this then the family home may have to be sold so that the equity contained in it can be split between them.

In cases involving children this can sometimes mean that one party can stay in the family home with the children. The Courts always place a high degree of importance on the needs of the children. The Courts will not, however, allow an unfair settlement to either party, so this form of arrangement will depend on the other spouse’s financial circumstances and their ability to afford a second home to live in. The spouse leaving the family home can still maintain a financial share of the home, which they will receive on the eventual sale of the property.