Financial considerations in divorce – who gets what?

Navigating the Uncertain Waters: Financial Settlements in Modern Divorce

The Law Commission’s recent review has highlighted a critical weakness in our legal framework: the lack of coherent structure for determining financial outcomes in divorce proceedings. With judges wielding considerable interpretive latitude under the current statutory provisions, divorcing couples face an environment characterised by unpredictability rather than clarity. This uncertainty not only complicates negotiations but potentially undermines public confidence in the family justice system.

This article examines how discretion shapes financial settlements under the existing legal framework, before exploring the Commission’s proposed reforms designed to inject greater certainty into what has long been a notoriously unpredictable aspect of family law.

Current provisions for financial settlements in divorce

Financial settlements in divorce are based on the principle that there should be a fair division. The law establishing this is contained in the Matrimonial Causes Act 1973 (the “Act”). Whilst the provisions indicate that they should be fair, that does not mean there must be a 50/50 split.

Clause 25 of the Act introduces several matters to which the court must have regard when exercising its powers in relation to financial settlements. The court must consider:

• Each party’s income, earning capacity, property and other financial resources. The judge will consider each party’s resources now and for the foreseeable future.
• The financial needs, obligations and responsibilities of each party.
• The standard of living the family enjoyed during the marriage.
• The parties’ ages and how long they were married.
• Whether either party had a physical or mental disability.
• What contribution each party has made or is likely to make to the family’s welfare in the foreseeable future. This includes looking after the home or caring for the family.
• How each party has conducted themselves. This applies if the conduct is such that, in the court’s opinion, it would be inequitable to ignore it.
• The value of each party to any benefit they will lose due to the divorce.

Further provisions in relation to children

The court must consider the financial needs of children, not only those shared by the parties but also those who are not children of one of the parties.

In respect of children shared by the parties:

• The financial needs of the child.
• The child’s financial resources, including any income, earning capacity and property.
• If the child has a physical or mental disability.
• The child’s education: current and expected education requirements.
• Any of the considerations discussed above between the parties in so far as they relate to the child.

And, in respect of children who are not children of one of the parties:

• Whether the party who is not the natural parent assumed any responsibility, the basis on which that was done and what, if anything, they contributed to the child’s maintenance and how that contribution went on, and
• Whether they did that in the knowledge the child was not their own, and
• The liability of any other person to maintain that child.

When the court weighs these wide-ranging provisions, it might conclude that an unequal split of assets on divorce should favour one of the parties.

The Civil Partnership Act 2004 contains provisions that mirror those in the Matrimonial Causes Act 1973 and apply to the dissolution of a civil partnership.

The Law Commission and financial considerations in divorce

The Law Commission has conducted a detailed review of the law. It has concluded that “it is not possible for an individual going through a divorce to understand, by reading stature, how their case will be decided. The law lacks certainty and accessibility to an extent that could be argued is inconsistent with the rule of law.” In other words, the Law Commission believes this area of law badly needs remediation and consolidation.

On 18 December 2024, the Law Commission published a Scoping Report. This is a detailed report, and it discusses four possible models for reforming the law:

• Codify the existing law.
• Codify the law and provide statutory reform on discrete issues (for example, pre-nuptial agreements).
• Introduce a set of underpinning principles and objectives to guide the court’s discretion.
• Create a ‘matrimonial property regime’ that will provide rules for dividing up property on divorce, with the court’s discretion strictly confined.

The Commission believes it is essential to introduce a degree of certainty into divorce proceedings regarding financial matters.

Seeking Certainty During Transition: Alternative Approaches

While we await the implementation of the Law Commission’s proposals, separating couples need not navigate the uncertainties of the current legal framework alone. For those prioritising predictability and control over their financial futures, a constructive alternative would be to consider collaborative law.

Collaborative Law: Creating Certainty Through Shared Commitment

Collaborative law takes this approach further by creating a contractual framework for negotiations. In this process:

• Both parties and their collaboratively trained lawyers sign an agreement committing to resolve matters without court intervention.
• All negotiations occur in four-way meetings where everyone works together to develop mutually acceptable solutions.
• Financial, child and other specialists can join the process as neutral experts when needed.
• If the collaborative process breaks down, the original lawyers must withdraw, creating a powerful incentive to succeed.

This approach provides greater certainty through its structured nature and the commitment of all participants to finding workable solutions. By removing the threat of litigation during negotiations, collaborative law often creates space for more creative and personalised financial arrangements that meet both parties’ underlying needs.

By choosing Resolution membership or collaborative law, separating couples can create islands of certainty within the current discretionary framework—controlling process and outcomes through professional commitment and structured engagement rather than leaving their financial futures to the interpretive discretion of the courts.

For more information, please contact:

Simon Walker

simon.walker@mogersdrewett.com

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