When assessing your financial settlement, the court will assess if the division of assets is fair. However, there is a wide discretion and interpretation as to what ‘fair’ means and there are a number of factors that the court considers in reaching its decision. To assist us and the court in determining this, we require full and frank disclosure to understand what assets are in the marital pot for distributing and for meeting both spouses’ needs.
Financial Proceedings and formal disclosure
In England and Wales, financial disclosure is a fundamental aspect of the divorce process, crucial for ensuring fair and equitable settlements. In financial proceedings, a document called “Form E” is completed by both parties to provide a comprehensive financial statement that includes details on income, assets, liabilities, and expenditures. The Form E requires worldwide disclosure for:
- All properties owned, detailing the manner in which they are owned
- All bank or building society accounts, supported 12 months of statements
- Any ISAs, Stocks, Bonds or other investments
- Details of Life insurance polices
- Any cash held over £500
- Any personal belongings valued over £500
- Details of liabilities i.e. credit cards and banks loans
- Actual or potential capital gains tax liabilities
- Any business assets
- Any pension valuations
- Earned or self-employed income, as well as any state benefits received
- Interests under trusts or any imminent inheritances
Alongside this disclosure, within the Form E, both parties also complete a ‘schedule of income needs’ detailing their monthly/yearly expenditure. This allows the court and legal representatives to evaluate what each person’s needs are by comparing their outgoings to their income and assessing how any shortfall in income can be met.
This disclosure is then used to form the basis of settlement discussions to assess the financial needs, responsibilities, and resources of each spouse. The court aims to distribute assets in a way that is considered fair, balancing factors such as earning capacities, childcare obligations, standard of living and length of marriage, as well as contributions of each party, for example. All of these factors are vital in ensuring the needs of each spouse is measured and will often require provision beyond a simple 50/50 split.
Negotiations and out-of-court discussions
It is not only within court proceedings that financial disclosure is needed; successful negotiations outside of litigation also require an understanding of the assets involved. Even agreements reached outside of court must be approved by a judge to be binding and to formally sever any future financial claims between spouses. The agreement must be presented to the court alongside an accompanying statement of information (D81 form), which provides a summary of both parties’ finances to the court and therefore requires each party to set out a summary of their financial position to each other.
Without seeking some form of disclosure, your legal representatives cannot advise whether the agreement is within the parameters of fairness and whether a judge is likely to approve your settlement based on the finances as they are, and whether all potential claims and future financial issues have been dealt with. Hence, we therefore cannot advise in full on any risks associated with any proposal or settlement that is reached.
Often legal representatives will suggest that Forms E are completed on a voluntary basis to ensure that all information has been provided and nothing forgotten. However, as detailed above, the Form E is comprehensive and requires a lot of supporting evidence. While best practice is to complete a Form E in its entirety with all the supporting evidence, sometimes parties might agree to a reduced financial disclosure where you might only provide 3-month bank statements instead of 12 months, for example. Completing this kind of short form of disclosure is much more beneficial to ensuring a fair settlement has been reached than no disclosure at all.
Financial disclosure is not just a legal formality but a crucial component that affects the outcome of financial settlements. Transparency and honesty help maintain a level of trust and respect to facilitate smoother negotiations and discussions, as well as assisting with determining what a fair and equitable solution is for your needs, to ensure you are protected, and to be able to move forward with a secured future.
Legal Advice
It is essential for anyone contemplating separation to consult with an experienced family lawyer who can provide guidance on how to navigate the complex legal complexities of a divorce and financial settlement, ensuring that their rights and interests are protected throughout the process.
At Rayden Solicitors, we can provide tailored legal advice, support the collection of relevant evidence, and advocate for our client’s position during court proceedings and assist with negotiations and out-of-court discussions.
If you require legal advice in relation to financial remedy proceedings or initial negotiations, please do not hesitate to get in touch with one of our specialist solicitors.
