Don’t risk your finances with a ‘no fault’ divorce

Tue 3rd Jan 2023

With a significant increase in divorces since the ‘no fault’ law was introduced in 2022, Coodes’ Bradley Kaine looks at why it is important to protect your finances this year.

Over 100,000 divorces are granted in the UK every year and the latest figures released by the Ministry of Justice (MoJ) show a significant rise in divorce petitions between April and June 2022, following the introduction of the new ‘no fault’ legislation.

In this period, more than 33,000 applications were made under the new law – the Ministry’s statistics show that is an increase of 22 per cent on the same period in 2021 and is the highest number of applications in the last ten years.

The idea behind the new ‘no fault’ divorce law, the government says, is to “reduce the potential for conflict amongst divorcing couples” and to make the process more amicable and less acrimonious.

From my own experience, I know that many people were holding out for the change in the law so they could move on amicably. The old system did not allow for that, as the petitioning party had to cite a reason for divorce and apportion blame.

The new system means that courts can process applications more quickly, the process is streamlined and much less contentious.

While many couples breathed a sigh of relief that the divorce process would become somewhat easier to navigate, there is a concern that in the rush to get the divorce done and dusted and move on, people are giving little thought to their finances.

Financial orders

As the number of divorces increase, there has been a worrying decline in the number of financial order applications being made – the MoJ says 31 percent fewer, to be precise.

A financial order is a legally binding document which sets out how you and your ex-spouse will deal with and divide your finances and assets upon divorce. There are many things to consider which may include your property, pensions, savings, and spousal maintenance to name just a few.

Not making a financial order application is foolhardy – they are critical – if you do not have one in place and do not take expert legal advice from the outset, you may find yourself exposed to the risk of lengthy and costly disputes or potential claims on your assets in the future.

Clean break clause

Financial order applications are not automatically covered under the new laws, they are not part of the process. It is a document that you must complete separately to legally establish entitlement to assets and, if appropriate, cut any financial ties between former spouses.

As part of a financial order, it is often advisable to include a ‘clean break clause’. It means that each of the divorcing parties cannot make a financial claim or ask for financial support from the other in the future. By not having a ‘clean break’ order, a former spouse could potentially make a legal claim at any time during your life and even after you die, on your estate.

Protecting your finances

Although the ‘no fault’ divorce law removes the need for blame, it does not change how you should deal with your financial settlement. Failure to make provision for protecting your finances could leave you in a risky position.

It is important to have full disclosure of both parties’ finances before agreeing a way forward – by not having the full information, you are essentially making a leap of faith or going in blind.

One of the main things that I find people do not always consider is pensions. Whilst you may know what the house or car is worth, you do not always have the full picture about your ex-spouse’s pension pot.

Not knowing what you may be legally entitled to through full disclosure means that you may neglect pensions, for example. Later down the line a former spouse may realise the other party has a much larger pension pot which they could potentially seek a percentage of.

Take advice from the start

It is very important that you take legal advice from the start. By getting professional help, you can be confident that all your legal bases are covered.

By knowing what you are getting into, understanding the risks, and taking the necessary precautions, you will be in a much better position to protect your financial position in the future.

Whilst the current financial climate and cost-of-living crisis might put some people off, not taking legal advice could cost you a lot more in the long run.

For more information about the ‘no fault’ divorce process and financial orders, you can also read Anna Barrick’s blog. To get help or legal advice, call the family team on 0800 328 3282 or use the Contact Us form on our website.

Tue 3rd Jan 2023

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