What is a divorce settlement?
A divorce settlement sets out what you and your spouse are each entitled to financially and will deal with division of property and assets. It can also include childcare arrangements, how child-related costs (such as child maintenance, school, and nursery fees) are to be dealt with, and cover other ancillary matters as required.
Financial settlement terms can involve transfer of property, sale of property and division of proceeds, pension sharing (i.e. pension transfer), payment of lump cash sums, treatment of business assets (transfer of shares; dissolutions; buy outs etc.); transfer of ownership of other property such as motor vehicles, policies, shareholdings and division of household belongings/furniture, payment of child maintenance and payment of spousal maintenance.
A divorce settlement will either be set out in a formal, contractually binding, legal agreement signed by each of you (a Separation Agreement), or it will be in the form of a Court Order. The only exception is if you agree to go to Arbitration, where there will be an Arbitration Award.
How is it worked out?
While you are entitled to agree anything you want in relation to how you deal with financial matters between you, most divorce settlements are agreed following some form of process of negotiation.
Unless you both agree otherwise, this negotiation process will involve looking to apply the legal framework that makes provision for how the value of matrimonial assets and liabilities should be shared and for any ongoing financial support.
A court-ordered settlement, determined by a judge, always applies the legal framework to provide an outcome.
What does the legal framework provide for?
The law places an emphasis on a fair sharing of what is deemed to be “matrimonial property”. The law applies in exactly the same way for married couples and civil partnerships.
Matrimonial property is all property that exists at the date the parties separated, that was acquired by them individually and/or in joint names, between the date of marriage and the date of separation. It includes both assets and debts and those are (usually) valued at the date of separation.
Specifically excluded are pre-marital assets (other than a family home), inheritances, and gifts from third parties. Such assets are non-matrimonial property and are excluded from the pot for division upon divorce or dissolution.
The starting point, and in many cases also the end result, is that the net value of the matrimonial property is split 50/50.
While there are other additional claims that can be made, including compensation for economic disadvantages suffered by one spouse or party in the interests of the family, recognition for non-matrimonial funds introduced to the matrimonial pot, a payment to reflect the additional costs involved in caring for children following separation, or for spousal support, the main focus is on the fair sharing of the matrimonial property.
So far as child maintenance in concerned, if you can’t agree between you how much child maintenance should be paid, the Child Maintenance Service can be asked to make an assessment. The courts will only get involved in child maintenance issues in very limited circumstances.
What do I do to get a divorce settlement?
The best advice is to consult a family lawyer for advice in the first instance.
The ideal situation is that you and your spouse will be able to reach an agreement on all the matters involved, avoiding the need to involve a court to make decisions on your behalf.
If you agree a settlement, it is always advisable to record it in a Separation Agreement, prepared by an expert family lawyer. Failing to do so runs the risk of one party changing their mind and looking to claim something different at a later date.
As well as dealing with all agreed financial and child related matters, a Separation Agreement will bring an end to all further rights and claims you have against each other. It can also bring an end to any obligations that otherwise automatically come with being married, including inheritance rights. Once signed and implemented, while you will remain married in terms of status, you can otherwise be entirely disentangled from one another in terms of rights and obligations. The granting of a divorce itself can then be obtained in a straightforward and undisputed manner, by way of a written application being made to the court, requesting divorce only.
There are different approaches that can be taken to attempting to agree a settlement:-
- You can discuss and agree what you want directly between yourselves. You can choose to do this without obtaining full legal advice, but you should still consult a family lawyer to have them prepare the Separation Agreement. It would be prudent to ask your lawyer to also confirm if they see any issues with implementing what you have agreed, such as from a tax or practical perspective.
- Mediation - there are two types of mediation - family mediation and solicitor mediation. In both cases, an independent, impartial mediator will facilitate, and support, you in discussing the matters that need to be resolved for you to try to reach agreement. The mediator cannot give you advice; although a solicitor mediator (known as a CALM mediator), will be able to provide legal information as part of the process. You will each still need a family lawyer for the purpose of putting in place the Separation Agreement once you have reached agreement.
- Collaborative Family Law – each of you engage your own independent, Collaboratively trained, family lawyer.. All negotiations take place at around the table meetings, with both of you and your lawyers present. You agree to all work together to find solutions; and you agree not go to Court. If you cannot reach agreement and Court becomes necessary, that is still possible, but the collaborative process ends and you each need to instruct new lawyers.
- Traditional negotiation – you each instruct your own independent family lawyer. Your lawyer will advise you, deal with exchange of relevant information and conduct negotiations on your behalf. If agreement is reached, they will then draft the Separation Agreement.
If you simply cannot reach agreement on all, or even some matters, a third party decision maker can be involved to provide a resolution. Your lawyer will advise you and represent you in the process. The options are :-
- Arbitration – an expert family law Arbitrator determines matters. They can be asked to decide all issues or just certain ones that you cannot agree on. Arbitration is a voluntary process so both of you would have to agree to Arbitration; and you would need to agree on what issues you are asking the Arbitrator to make a decision on.
- Court - Court ordered settlements involve the raising of a divorce action in either your local Sheriff Court, or the Court of Session in Edinburgh. The Judge will, after what is usually a fairly drawn out process, determine matters as between you and make a final order to grant divorce, alongside a financial settlement. Child related issues can also be determined by the Court at the same time, or under separate proceedings.