I have a financial agreement. Do I need a financial court order? banner


I have a financial agreement. Do I need a financial court order?

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Most divorcing couples think that if they have reached a financial agreement with their husband or wife that they do not need to go to the trouble and expense of applying to the divorce court for a financial order. The best London divorce solicitors would warn divorcing couples not to assume that an agreement with their spouse is binding without a financial court order.

In most situations divorced couples do need the protection of a financial court order to give financial security and peace of mind. They may also need a financial court order to implement what they have agreed, for example the transfer of a property or the sharing of a pension. Top London divorce solicitors recommend obtaining a financial court order because if a couple have reached agreement over how their property is split getting a financial court order is not as complicated or as expensive as couples might think.

Why do you need a financial court order?

Whilst most couples think it is necessary to reach an agreement over how they divide their assets when they separate or divorce, many do not feel the need to write their agreement down, let alone formally record their agreement in a document called a separation agreement or go to the formality of obtaining a financial court order. That is fine provided that there is no change of heart or other complications such as:

  • One spouse disputing that there was an agreement or a complete agreement over how money and other assets should be split. It is difficult to prove that there was an agreement if it was made verbally. It can be equally difficult to establish that an agreement that was written down without a London divorce solicitor’s input and without financial disclosure is binding on spouses or constitutes a complete agreement over all potential and future financial claims, for example, spousal maintenance or pension provision. Often it is the case that a couple will agree to sell their house and split the equity but there will be no detailed discussion or record of what was agreed in relation to all the other potential financial claims they could make;
  • One spouse needing a formal financial court order for third party purposes. For example some mortgage companies want evidence of spousal maintenance payments before they will take this income into account when assessing the amount they will lend on a mortgage;
  • A spouse needing evidence of their financial agreement with their ex-spouse to establish that money or property transferred to them was part of a divorce financial settlement. For example, without a formal financial court order a trustee in bankruptcy can try and look behind a property or money transfer to a spouse or ex-spouse to try and recover monies due to the creditors of the spouse who transferred the assets. Obtaining a financial court order does not give a complete guarantee that a trustee in bankruptcy will not apply to set aside transactions but a financial court order gives far greater protection than a verbal or written agreement between spouses;
  • A spouse needing a financial court order to implement a pension sharing order. Even though a husband and wife may have agreed to share a pension  the administrator of the pension fund  cannot implement their agreement to share the pension without the decree absolute of divorce and a financial court order;
  • The agreement between the divorced couple requires one of them to do something at a later date or provides for a continuing obligation. If circumstances change and the ex-spouse is unwilling or unable to honour the agreement then it will not be capable of enforcement without a financial court order;
  •  An ex- spouse dying without a financial court order in place resulting in the spouse who is receiving spousal maintenance being in a vulnerable position without a financial court order saying out what was agreed or the estate of the deceased facing a claim against the estate because there was no financial court order preventing financial claims on death by the ex-spouse.

That is why top London divorce solicitors strongly recommend that couples, however amicably they split up, get a financial court order from the court to formally record their financial agreement. If a financial court order is not obtained it can lead to a lot of unnecessary stress and extra legal costs if there is a future dispute as to what was agreed.

Most people think that "it will not happen to me"  but the best London divorce solicitors will say that there are numerous examples of where spouses have lived to regret not obtaining a financial court order, such as:

  • The entrepreneur who married young and separated from his wife when the couple had nothing. Many years later the wife brought a financial claim when the husband's business was worth millions. She was able to make the court application as there was no divorce  or financial court order;
  • The lottery winner who got her big win after her divorce  but she had not got a financial court order at the time of the divorce  leading the way open to a financial claim by her ex;
  • The couple who agreed to part ways only for one of them to fall on hard times while the other landed on his or her feet securing a job in the city with large bonuses – the economically weaker spouse could apply for spousal maintenance unless he or she had remarried. A claim would not be possible if there was a financial court order that specifically stated that no future claims could be made. This type of order is called a clean break order;
  • The ex-spouse who, after the divorce, inherits or receives a lifetime gift from a relative. Potentially financial claims could still be made even after the divorce has been finalised if there is no financial clean break order in place.

All these scenarios highlight why it is important to secure a financial court order at the time of the divorce proceedings. In some family situations there will be ongoing financial responsibilities between the ex-husband and wife and therefore the potential for further financial claims, for example an application to increase the amount of spousal maintenance or to extend the time period that spousal maintenance is paid. However the best London divorce solicitors would nonetheless recommend that all separating couples take expert legal advice as, in the vast majority of situations, a financial court order is a sensible and prudent step for both husband and wife.

OTS Solicitors advise on all aspects of divorce and financial settlement law and have substantial experience in advising on and preparing financial court orders. OTS Solicitors also provide specialist family and children law advice. Please get in touch with us on 0203 959 9123 to arrange an appointment to speak to one of our experienced divorce and financial settlement solicitors.

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