What is a financial order? What does the financial order include? What is a clean break? Here we explain.
What is a financial order?
A financial order, also known as a consent order, is the legally binding document that sets out the financial agreement reached between parties in the divorce proceedings (unless the parties are in the court process and have reached the final hearing, in which case the agreement will be ordered by the court). It is not until the consent order is sealed by the court that the financial ties between parties are severed.
The financial order is separate but runs parallel to the divorce process. It is important that when applying for the divorce, you tick the box that asks if you would like to apply for financial orders for yourself and the children (if relevant). If you are unsure on how to apply for a divorce, please contact our family finance team who will be able to assist you. You can also read more about applying for a divorce in our previous article.
If you have already received a financial order from your spouse, Tamsin Best, a Solicitor in the family finance team explains what you should do in this article.
What does the financial order include?
A financial order will set out how assets will be divided between the two parties. No two financial orders will be the same as they are case specific. It is important that the order is drawn up by a solicitor as it needs to be in a specific format.
The financial order may include the following provisions relating to:
1. Property
- Depending on the agreement reached, the financial order may include, for example, an order for sale or transfer of ownership in exchange for a lump sum payment
2. Pension
- If the parties have agreed to share pensions, then the financial order will recite this and a pension sharing annex will be attached to the financial order.
- For the pension sharing to be implemented the pension provider will need both documents along with the final divorce order.
3. Savings and investments
- The financial order can provide for how, if any, savings are to be divided. This could require one party to transfer to the other a certain amount from their sole savings account or it can order that the savings in a joint account be divided pursuant to the agreement reached between parties and the account closed.
4. Businesses
- If there is a business involved, and both parties have shares in the business. The financial order can refer to a share purchase agreement where the shares of one party is transferred to the other.
5. Bank accounts
- The financial order can instruct that any joint bank accounts are closed or are transferred into one party’s sole name.
6. Chattels
- The financial order can stipulate how the house contents are to be divided and in some cases parties may choose to attach an inventory to detail the ownership of specific items.
7. Debts and liabilities
- Provisions can be included to detail how any debts are to be repaid and who’s responsibility they will become in the future.
8. Maintenance payments (child or spousal)
Although you may feel that you do not need a financial order as you and your ex-spouse do not own any or very few assets, the financial order protects future claims as well as current. The order can contain a provision known commonly as a ‘clean break’.
Therefore, it is important that a financial order is drawn up and approved by the court regardless of the amount of assets.
What is a clean break?
A clean break severs any future financial ties with your ex-spouse and prevents them from making a financial claim in the future. This may be important when you receive inheritance, a job promotion which significantly increases your income or if you were to unexpectedly win the lottery. The exception here is child maintenance, which will remain payable regardless of a clean break order.
If a financial order was not put in place at the time of divorce, then this means that your ex-spouse could make a claim in any of those scenarios at a later date.
If you have reached an agreement with your spouse and would like this to be drawn up into a financial order, please contact our family finance team on 0345 450 5558 or enquiries@stephens-scown.co.uk