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Failing to agree a financial settlement during a divorce can prove costly
It’s surprisingly common for separating couples not to seek advice from a solicitor on the terms and detail of a financial agreement on divorce, because they have reached a financial settlement between themselves. This can be costly in more ways than one. Years down the line, one can find that issues you thought were resolved and concluded were not, according to law.
It is beneficial to everyone, both emotionally and financially, if an agreement can be reached and we always encourage this where possible. But it is vital to confirm the terms of the agreement in a financial consent order approved by the court, which makes it legally binding and prevents a party from pursuing financial claims in the future.
In one scenario, a husband on separation reached an agreement as to the division of their finances with his wife. He continued to work and pay into his pension over the coming years. On the cusp of retiring, he received a letter from his now ex-wife’s solicitors explaining that she sought a share of his pension and if he touched his pension, they would apply to have it frozen. He suddenly faced the possibility of his retirement pot being subject to a claim and potentially less for him than he had hoped.
A divorce ends the marriage only. It does not dismiss all the financial claims that a spouse or civil partner can make in respect of property, assets, income, and pensions. Such claims remain open, even years after the divorce, unless formally dismissed by a court.
Whether such claims are successful depends on the individuals’ circumstances. It will involve the parties trying to recall what the financial position was at the time of separation and what the terms of their agreement were, as well as the stress and expense of resolving the matter.
A court won’t necessarily uphold a previous agreement because the court assesses the case at the time the claim is made. Even if the agreement reached appeared fair at the time, circumstances and the law might have changed since then.
The court will consider the financial history and terms of agreement reached. If one party alleges non-disclosure; claims it was unfair; does not meet their needs; their needs have now changed, or they did not seek advice, there is a real possibility that further provision will be made.
Many people are unaware of the extent of potential financial claims, particularly surrounding pension provisions, which can be overlooked when parties agree financial settlements between themselves.
It is essential to take professional legal advice and record the terms of the financial settlement in a consent order. Once approved by the court, it becomes legally binding, including formally dismissing any further claims.