Financial proceedings during divorce

When couples divorce, if they are unable to agree on how their assets should be split, the Court can be asked to determine how their resources should be divided.

This is when financial proceedings begin and there will usually be three main hearings within this process – although the parties will be encouraged to reach an agreement at every stage.

What are the different hearings in financial proceedings?

There are usually three Court hearings within finance proceedings following divorce:

  1. First Directions Appointment (FDA)
  2. Financial Dispute Resolution Appointment (FDR)
  3. Final Hearing

1. What is a First Directions Appointment (FDA)?

The First Directions Appointment is a case management hearing, where a Judge will give directions for the future conduct of the case.

Issues are summarised for the Court and then the Judge will use his or her powers to control and move the case forward.

There will be an attempt to narrow the issues, and so reduce costs. For example, if the parties cannot agree what their assets are worth, expert valuations may be required. If there are complicated pensions or business assets involved, it may be necessary to get a report from an expert about how these might be divided, or buy-outs funded.

Often, directions can be agreed, but if not, your lawyers will put the case to the Judge, who will decide what should happen.

If a case is not settled at the first hearing, the second hearing will be scheduled.

2. What is a Financial Dispute Resolution Appointment (FDR)?

Effectively, the Financial Dispute Resolution Hearing will involve the Judge giving his or her indication of how they would decide the case. It is designed to help the parties reach an agreement, although no decision can be imposed on them. Judges often give robust advice and might be said to be attempting to bang the parties’ heads together to help them reach a settlement.

This second hearing is entirely privileged – which means that the Judge cannot hear any Final Hearing if the case isn’t settled. Whatever is discussed at this hearing cannot be relied on at a later date. Therefore, if agreement is not possible, a date will be set for the final hearing before a different Judge.

3. What is a Final Hearing in financial proceedings?

At the Final Hearing, each party, or their lawyers, will put their best case forward, and both parties will usually be required to give evidence.

Having heard all the representations and evidence, the Judge will decide how the parties’ assets will be divided, and whether either should be obliged to continue to provide an income to the other.

What are directions hearings?

Throughout proceedings, directions hearings can be arranged. These are shorter hearings, normally where one party seeks a directions that their spouse do something particular, i.e. a directions that a party produce evidence.

There is the opportunity to settle your case from the moment financial proceedings begin, even at Court before the hearing itself and right up until the final hearing. Should you and your spouse reach agreement, you will ask the Judge to approve it.

Is there one rule for the famous and one for everyone else when it comes to attending Court?

The short answer is, no, as Ant McPartlin found recently when he was criticised by a Judge, the Honourable Mr Justice Mostyn, for not attending a Court hearing dealing with the financial claims between him and his soon to be ex-wife, Lisa Armstrong.

Whilst Ant apologised, saying he’d been told by his lawyer that he didn’t have to attend, and meant no disrespect, his non-attendance could have had consequences in terms of possible delay, and even who picks up the bill for the hearing.

Do I have to attend every financial hearing?

Yes, if you receive notification of a hearing you have to be there, unless it is agreed by everyone that you do not need to be. As Ant found to his cost, unless there is a good reason, you run the risk of incurring the wrath of the judge, and non-attendance may well result in unnecessary delay and cost.

We can help you

Financial proceedings are complex and there is a significant amount of work to undertake before and during a hearing and, usually, even afterwards! It is important to get expert legal advice to ensure that the outcome doesn’t come as a nasty surprise.

We’re here you for you. Please contact us if you’d like to discuss matters further.

Why are clean break orders so important?

You may obtain a divorce but decide that you do not need a clean break order. This could be either because you and your spouse have reached an agreement about who should have what, or because you don’t have many financial resources; maybe you do not own a property, or you don’t have a pension.

However, a few years down the line you win the lottery (lucky you!). The downside is that unless there was a clean break order dismissing your ex-spouse’s claims (and they have not remarried), it remains open to them to make an application to the Court for a share of your winnings.

Lottery wins are rare, and inheritance less so, but the same principle applies. Your ex-spouse may bring a claim for any monies you inherit.

What can happen if you don’t achieve a clean break order?

Wind farm millionaire, Dale Vince, probably regrets not understanding the importance of this question when he divorced in October 1992.

Mr Vince was the founder of the green energy company, Ecocity. The company was very successful and 20 years plus after he and his wife divorced (without obtaining a clean break order) she brought a claim for a share of his wealth.

Ultimately, after Mr Vince had spent vast sums on legal fees and took the matter to the Supreme Court, an agreement was reached, which it is believed involved Mr Vince paying a lump sum to his long-divorced other half, sufficient to allow her to have a mortgage-free home.

Circumstances change and whilst you may not think it important to get a clean break order now, you may come to regret that choice in the future.

Can my ex-wife get my pension?

If you are divorcing and the application for the divorce (previously called a divorce petition) was lodged with the court on or after 1st December 2000 then, yes, your spouse is able to ask the court to make a pension sharing order. This is assuming the court hasn’t previously been asked to make a clean break order, which brings to an end all financial ties with your ex-spouse.

Divorce lawyers will need to ascertain the value of both you and your spouse’s pension pot by asking you for the cash equivalent transfer value (CETV). This is the amount that you can take from the fund and transport into a different fund.

The figures, very often, can seem to be huge. But remember, that figure needs to be large because it needs to be sufficient enough to provide you with an income to last you your lifetime.

What are the options for sharing my pension with my ex-wife?

  • Sharing: this is a formal agreement to divide your pension assets at the time of the divorce. The court will award your spouse a specific percentage of your divorce and your spouse is able either to become a member of your pension provider’s fund (known as an internal transfer) or transfer that percentage to a new pension provider (an external transfer).
  • Offsetting: the value of your pension fund is offset against other assets of the marriage.
  • Earmarking: all or part of your pension is earmarked to be paid to your spouse when you start to draw your pension benefits. There is no legal transfer of ownership.

Most divorcing couples go for the pension sharing option. It is seen only to be fair that a pension should be shared in this way when a pension is the largest or second largest asset most husbands and wives have.

The percentage which you lose is called the pension debit and the percentage which your spouse will receive is called the pension credit.

So can my pension pot be shared?

Yes, if it is:

  • an occupational pension scheme;
  • a SIPP;
  • a personal pension;
  • a stakeholder scheme;
  • a Section 32 policy;
  • a retirement annuity contract;
  • a free-standing AVC;
  • an employer-financed retirement benefit scheme or unapproved scheme;
  • a contracted out benefit scheme state second pension (S2P); or
  • a SERPS (state earnings-related pension);
  • AND any of the above even if they are already in payment.

However, the basic state pension cannot be shared nor the new state pension nor any pension pot that you already received as a spouse.

So, briefly, the answer is yes, your ex-wife can get her hands on your pension, if you haven’t yet obtained a clean break order.

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