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5 Financial Settlement Mistakes to Avoid During Divorce

A woman's hand carefully pulls a block from a tall wooden tower game, illustrating the need for a steady and precise approach to avoid mistakes during a financial settlement

The process of divorce is inevitably complex, and when it comes to untangling years of shared finances, the pressure can be immense. The goal is to reach a financial settlement for divorce that is fair and provides security for the future.

However, in a rush to finalise proceedings and move on, it’s easy to make critical errors that can have long-lasting consequences. Here are five of the most costly mistakes people make during a financial settlement and how to stay clear of them.


1. Failing to Provide Full Financial Disclosure (or Believing Your Partner Has)

The entire foundation of a fair financial settlement rests on honesty and transparency. Both parties have a legal duty to provide a full and frank financial disclosure of all their assets and debts. The most dangerous mistake is either attempting to hide assets or assuming your ex-partner has been completely truthful without verification. 

Non-disclosure can take many forms, from undervaluing a business interest to “forgetting” about a savings account or providing an old, lower balance for a new investment. Hidden assets isn’t a clever tactic; it’s fraud. If discovered, the consequences are severe, and the court has the power to set aside a previously agreed order and impose significant legal cost penalties.

How to avoid it

Be meticulous in preparing your own financial disclosure (Form E) and critically review the information provided by your ex-partner. If you have suspicions, your solicitors can help you ask the right questions, and if necessary, take steps to investigate further.


2. Underestimating or Ignoring Pensions

Pensions are frequently the largest or second-largest asset in a marriage after the family home and yet they are the most commonly misunderstood and undervalued. A 2023 study from the University of Bristol found that over a third of divorcing individuals didn’t know the value of their own or their partner’s pensions. 

Simply looking at a pension’s Cash Equivalent Value (CEV) on an annual statement can be misleading, especially for defined benefit (final salary) schemes. This figure doesn’t always reflect the true value of the benefits the pension will provide in retirement. 

How to avoid it

Don’t overlook pensions. The Pension Advisory Group’s 2019 report, which guides the courts, stresses the need for expert analysis. In many cases, particularly with complex or high-value pensions, a pensions actuary should be instructed to provided a proper valuation and report on how the pension can be fairly shared. This ensures that you are negotiating with accurate figures.


3. Forgetting About Debts and Liabilities

A financial settlement isn’t just about dividing assets; it’s about dividing your net wealth. This means all liabilities including mortgages, loans, credit card debts, and overdrafts must be accounted for. 

A common mistake is to focus solely on the value of property and savings without creating a clear balance sheet of all marital debts. Debts incurred by one party after separation but before the financial settlement can complicate matters.

How to avoid it

Work with your solicitor to create a comprehensive list of all joint and sole debts. This should be a key part of your financial disclosure. According to guidance from credit agencies like Experian, it’s also wise to check your credit report to ensure you are aware of all joint credit agreements that could affect you.


4. Settling Too Quickly Without Proper Legal Advice

The emotional toll of divorce can make many want to get the process over with as quickly as possible. While this is understandable, rushing into a settlement without taking proper advice is a recipe for regret. Often, the financially weaker party is frozen by the fear of legal costs or other pressures and may be tempted to cut corners.

However, now is the time to get it right. Trying to set aside an order later is another layer of litigation, risk and cost. The other party will likely argue that you had every opportunity to ask for the documents but failed to do so. Agreeing to unfair terms or overlooking assets can have devastating long-term implications. This is especially dangerous in High Net Worth Divorce (HNWD) cases where complex financial structures, business assets, or international elements require specialist analysis.

How to avoid it

Resist the pressure to sign an agreement just to end the process. Instructing an experienced family law solicitor isn’t about creating a battle; it’s about understanding your rights and ensuring you’re negotiating from an informed position. A solicitor can advise you on what a court would likely consider a “fair” outcome. 


5. Not Making the Agreement Legally Binding

Perhaps the most severe mistake is reaching an informal agreement and failing to have it legally formalised by a court. A verbal promise or a handwritten agreement hold no legal weight in England and Wales. Without a legally binding Consent Order approved by a judge, your ex-partner could make a financial claim against you at any point in the future, no matter how many years have passed.

The famous case of Vince v Wyatt [2015] illustrates this starkly. As we covered in our analysis of the case, the Supreme Court allowed a wife to make a financial claim against her ex-husband 18 years after their separation because they had never formalised their financial split in a court order

How to avoid it

Once you reach an agreement, it is absolutely essential that you instruct your solicitors to draft a Consent Order. This document is sent to the court for approval. Once sealed by a judge, it becomes legally binding and, in most cases, permanently severs financial ties and prevents any future claims.


Protect Your Financial Future

Agreeing a financial settlement for divorce requires a careful and considered approach. By avoiding these five common mistakes, you can protect yourself from future disputes and secure a settlement that is fair and robust. 

At Maguire Family Law, our team of experienced divorce solicitors provides the expert guidance in high net worth divorces.

Contact us today for discreet, comprehensive support and to ensure your settlement is handled with the expert attention it deserves.


References

Hitchings, E. (2023). Fair Shares? Dividing Assets on Divorce in England and Wales. University of Bristol. 

Experian. (2024). How Does Divorce Affect Your Credit Score?

Pension Advisory Group. (2019). A Guide to the Treatment of Pensions on Divorce.

Vince v Wyatt [2015] UKSC 14.

For specialist advice on any family law related issue contact Maguire Family Law by email: james.maguire@family-law.co.uk or telephone:

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