Guest Post: Why a Financial Remedy Order is Essential on Your Divorce
Today I’m sharing a guest article on a subject nobody likes to think about, but one that could be crucial to ensuring your financial security in later life..
Sadly, growing numbers of older people are seeing their marriages break down and having to undergo the painful process of divorce. Even if relatively amicable, this is likely to be stressful and emotionally exhausting. And – even worse – any mistakes you make now can have serious consequences for your finances, both now and into the future.
My guest today, Victoria Fellows, a partner and head of family at the Birmingham office of HCR Law, knows this very well. And she has some important advice for anyone who may find themselves in this situation.
Over to Victoria then…
Divorce rates among individuals aged 50 and over – often referred to as ‘silver splitters’ – have been on the rise in the UK over recent decades, with the number of over-60s legally separating doubling since the 1990’s. This trend contrasts with the decline in divorce rates across younger age groups. It can be put down to various factors, such as longer life expectancy, empty nest syndrome and the increasing numbers of financially independent women who are able to support themselves outside marriage.
At the end of 2024, the Law Commission published a scoping report on financial remedies on divorce. This indicated that 60% of the couples who divorced in 2023 had not properly dealt with their finances upon divorce, sometimes thinking it was not worth obtaining an order from the court as they believed they had no assets justifying the expense of formally separating their finances.
So while these couples are now divorced, both parties remain vulnerable to a financial claim application from their former spouse at any point until they remarry or die. The case of Vince v Wyatt illustrated why this was a mistake. The parties had nothing when they divorced and did not bother to get a clean break order. Post separation, Mr Vince became a multi-millionaire through his own business activities. Mrs Wyatt was allowed to bring financial claims against him 20 years after the divorce, resulting in a significant financial award being made in her favour.
Resolving financial issues during a divorce is therefore crucial for both immediate stability and long-term security. This is especially true for silver splitters undergoing ‘grey divorce’ – another term referring to divorces in later life. Unlike their younger counterparts, they will not have years of working life ahead of them to build up savings or pensions. It is therefore crucial that the marital assets are divided fairly to help ensure that both spouses have financial security during their retirement. There is also the possibility that in their fifties or sixties, one spouse will come into a substantial inheritance post-divorce which, without a financial remedy order, the former spouse could make a claim on in the future.
So What Do Financial Agreements Look Like?
As a result of being married, both parties have a number of financial claims that they can make against each other. The orders that a court can make are as follows:
- Orders for maintenance pending suit (‘interim’ spousal maintenance)
- Periodical payments orders (spousal maintenance for joint lives, specific term and/or a nominal amount)
- Lump sum orders
- Property adjustment orders
- Pension sharing orders
In deciding whether to make any of the above orders, the court must consider all the circumstances. These will include:
a) The income, earning capacity, property and other financial resources of each party or what they are likely to have in the foreseeable future, including any increase in that earning capacity.
b) The financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future.
c) The standard of living enjoyed by the parties before the breakdown of the marriage.
d) The age of each party to the marriage and duration of the marriage.
e) Any physical or mental disability of either party to the marriage.
f) The contributions which either of the parties have made or are likely to make in the foreseeable future to the welfare of the family, including any contribution by looking after the home or caring for the family.
In every case the court also has to consider whether a ‘clean break’ is appropriate. A clean break is where the parties’ finances are arranged to allow them to separate without any further financial responsibility for each other. While the court must give consideration to this, it does not mean that there can or should be a clean break in every case. This will necessarily depend upon the other factors involved.
How Are Agreements Reached?
There are a number of ways in which financial matters can be resolved:
- Discussions directly between the parties if they are able to discuss and agree a financial settlement that both of them are comfortable with.
- Mediation where both parties try to reach agreement between themselves with the assistance of a trained mediator.
- Negotiation through solicitors. Each party can appoint a solicitor to negotiate on their behalf. This approach is suitable for complex financial situations or when mediation isn’t appropriate.
- Other forms of dispute resolution. Arbitration and collaborative law are further alternatives. Arbitration is effectively a ‘private’ process that largely mirrors court proceedings but where the parties have more control in particular in respect of timescales. Collaborative law is a separate process which may only be suitable in certain circumstances. Each person appoints their own collaboratively trained lawyer and both parties and their lawyers meet together to work things out face to face.
- Financial remedy proceedings. If all other options fail, it may be necessary for formal court proceedings to be issued to resolve financial matters. An application for financial remedy can only be commenced after a Divorce Petition has been filed with the court. The proceedings usually involve attending court on three occasions. If financial settlement is not agreed at either of the initial two hearings, or in between them, then a final hearing will be listed at which the Judge after hearing evidence makes a decision that is binding on the parties. This would be the most cost-prohibitive option and can end with resolution of financial matters being taken entirely out of the parties’ hands.
Top Tips to Make the Process Easier
Seek professional advice as soon as possible. Consult with financial advisors and solicitors who are experienced in later-life divorce and can help navigate complex financial issues and ensure a fair settlement is not only reached but also incorporated into an order to be approved by the court.
Enter into full financial disclosure to ensure that all assets are disclosed and taken into consideration when looking at overall settlements that plan for short- and long-term financial security. This will take time, so start sorting out your paperwork early. This is likely to include bank statements, pension records and documents relating to any other investments you might have, e.g. premium bonds, stocks and shares, rental income, and so on.
Remember to consider wills and estate planning as divorce does not automatically revoke a will. It’s crucial to update wills to reflect new circumstances and ensure assets are distributed according to current wishes.
Divorcing later in life presents unique challenges, but with careful planning and professional guidance, it is possible to navigate the process and achieve a fair and secure financial settlement.
Victoria Fellows (pictured, below) is a partner and the head of the family team of the Birmingham office of HCR Law.
Many thanks to Victoria and her colleagues at HCR Law for an eye-opening article on this important topic. If you are unfortunate enough to find yourself in this situation, devoting some attention to financial planning now can potentially save you and your family a lot of grief in the future.
As always, if you have any comments or queries about this article, please do leave them below.