Divorce financial settlement agreements - key points

A financial settlement agreement is a crucial element of the divorce process, determining how assets, income, pensions, and liabilities are divided. Whether agreed voluntarily or decided by the court, the aim is to reach a fair and lasting resolution that reflects the couple’s circumstances, both now and in the future. Without a legally binding agreement, financial claims can remain open, even after the divorce is finalised.

While most aspects of finances can be made final (although this is not always the case because as part of negotiations, 1 or both parties may insist on "liberty to apply" - see more on this below), arrangements regarding children in a settlement agreement or order are not final (children in this context means generally under 18, unless they’re still in full-time education (like university) or have specific needs (e.g. disability)).

Is full financial disclosure necessary before reaching a financial settlement?

While not legally compulsory, having your divorce financial settlement turned into a court order (known as a consent order) is highly advisable. Full financial disclosure is also very important.

Without a court approved consent order, either party can make financial claims against the other at any time in the future, even decades after the divorce. This means future assets like inheritances, lottery wins or business success could be claimed. The court can also set aside informal agreements if one party didn't provide full financial disclosure.

To protect yourself, you should always ensure there's full financial disclosure, get independent legal advice, and have your agreement turned into a formal consent order approved by the court. This makes it legally binding and provides long-term security for both parties.

The importance of implementation clauses

Implementation clauses in divorce settlements are crucial as they establish clear timelines, responsibilities, and consequences for non-compliance. Specifically, clauses will usually include :

• Timeframes for actions - sets deadlines for each step to be completed

• Default provisions - what happens if someone doesn't comply

• Consequences of non-compliance - penalties or remedies for breach

Other important clauses in a divorce settlement

Divorce settlement agreements will often include complex or negotiable issues and forward looking clauses such as :-

• Life insurance requirements - ensures maintenance payments are secured if payer dies

• Property charges as security - uses property as guarantee for payment

• Provision for payment defaults - what happens if payments aren't made

• Protection against death - ensures arrangements continue if either party dies

• Requirements for maintaining security - obligations to keep insurance policies active

• Treatment of joint accounts - how and when to close or divide joint accounts

• Division of personal possessions - process for splitting household contents

• Tax indemnities - protects against future tax liabilities

• Future inheritance provisions - addresses treatment of future inheritances

Liberty to apply - what is it and why is it relevant?

Liberty to apply means agreeing that either party can apply to the court in relation to the settlement. For financial matters specifically relating to children (such as child maintenance through the Child Maintenance Service), the English legal system has built-in review mechanisms without needing liberty to apply provisions.

Liberty to apply clauses are important for, and usually restricted to, allowing the parties to apply to court for implementation issues. Common reasons included in a liberty to apply clause include :

• Implementation of asset transfers (e.g., if a property sale is delayed)

• Pension sharing order implementation issues

• Enforcement of payment schedules

• Resolving disputes about interpretation of specific clauses

• Addressing unforeseen tax consequences

• A time limit (commonly 1-2 years)

Lawyers involved will generally negotiate so as to avoid reopening substantive elements of a divorce financial settlement.

Will the court interfere in a financial settlement agreed by the parties?

Courts in the UK can and sometimes do interfere with an agreed financial settlement, even when both parties have consented. The court's primary duty is to ensure the settlement is fair and reasonable.

The court will typically approve agreed settlements if they appear fair, but can refuse to make a consent order if:

• The agreement is manifestly unfair to one party

• There are concerns about undue pressure or coercion

• Full financial disclosure hasn't been properly made

• The needs of any children haven't been adequately addressed

• The agreement attempts to oust the court's jurisdiction

In practice, courts rarely interfere with agreements reached after proper legal advice and full financial disclosure. Most rejections occur when settlements appear significantly imbalanced or when procedural requirements haven't been followed.

Grounds for challenging a financial settlement later

There are limited circumstances where a financial order might be challenged. These are deliberately restrictive to maintain the finality principle, and the threshold for success is high. Examples include :

• Material non-disclosure of assets - where one party failed to provide full financial disclosure

• Fraud or misrepresentation - deliberate deception about finances or circumstances

• Extreme unfairness (very rare) - only in the most exceptional circumstances

• Clerical errors or obvious mistakes - technical errors in the order itself

• Death of a party shortly after order - undermining the purpose of the arrangement

• New information that existed at time of order - but was unavoidably unknown

Need legal advice?

We have a highly experienced team of divorce lawyers who help clients negotiate and formalise legally binding agreements covering assets, income, pensions, and future financial obligations, ensuring clarity and long-term security.