A Step-by-Step Guide To Negotiating a Fair Financial Settlement

One of the most critical aspects of the divorce process is reaching a financial settlement. For anyone going through a separation, understanding how to negotiate a financial settlement for divorce is paramount to securing future financial stability. 

This guide aims to provide a clear, step-by-step approach to help you with these negotiations and work towards a fair and equitable outcome. 

Step 1: Full and Frank Financial Disclosure

The absolute cornerstone of any fair financial settlement is transparency. Both you and your former partner have a legal duty to provide full and frank disclosure of all your financial assets and liabilities, regardless of where they are in the world or whether they are in your sole name or held jointly. 

This process involves a detailed picture of your complete financial situation including: 

• Property, i.e. the family home or any other properties owned.
• Savings and investments, i.e. bank accounts, stocks, shares and ISAs.
• Pensions as one of the most substantial assets. Yet its value is frequently underestimated. A 2023 study by the University of Bristol highlighted that over a third of divorcing individuals were unaware of the value of their pension pots. 
• Income, i.e. salaries, bonuses, and other sources of income. 
• Business interests if one or both of you owns a business. 
• Debts including mortgages, loans, and credit card debts. 

This information is typically collated in a document known as a Form E. Accuracy and honesty at this stage are legal requirements. 

Any attempt to hide assets can lead to serious legal consequences and could result in the court setting aside a previously agreed settlement.

Step 2: Understanding the Legal Framework

There’s no single legal definition for a high net worth divorce in the UK. However, here’s how it’s generally understood:

In England and Wales, the court’s approach to financial settlements is governed by Section 25 of the Matrimonial Causes Act 1973. This legislation provides a framework for judges to ensure that the outcome is fair. It’s important to note that “fair” in this context, doesn’t automatically mean a 50/50 split. 

The court will consider several factors with the first consideration always being the welfare of any children involved. 

The key factors include: 

• The income, earning capacity, property, and other financial resources of each party. 
• The financial needs, obligations, and responsibilities of each party. 
• The standard of living before the breakdown of the marriage. 
• The age of each party and the duration of the marriage. The Office for National Statistics (ONS) reported that in 2022, the median length of marriage for divorcing couples was 12.9 years, a factor that often strengthens the case for an equal sharing of assets. 
• Any physical or mental disability of either party. 
• The contributions each party has made to the welfare of the family, including non-financial contributions like looking after the home or caring for children. 
• The conduct of each party, although this is only considered in exceptional circumstances. 
• The value of any benefit (such as a pension) which one party will lose because of the divorce. 

Step 3: Valuing the Assets

Once all assets have been disclosed, they must be properly valued. This can be straightforward for financial assets like bank accounts. You may need to engage professional valuers for: 

• Property: An estate agent or a chartered surveyor can provide a market valuation. 
• Pensions: An actuary may be required to produce a report on the value of pensions funds, following the detailed guidance set out by the Pension Advisory Group (2019) for treating pensions in divorce.
• Business interests: A forensic accountant can provide a valuation of a company, which can be a highly complex process. 

Obtaining accurate valuations is important for ensuring that the division of assets is genuinely fair. A key part of this process is utilising an established network of trusted professionals. 

We always obtain a number of quotes from our register of valuers, forensic accountants, and other specialists to ensure our clients receive the best value and keep costs down. This proactive management of expert costs is a crucial step in handling the process efficiently and cost-effectively.

Step 4: Exploring Your Options and Negotiating

With a clear financial picture, you can begin to explore how these assets might be divided. The aim is to meet the reasonable needs of both parties and any children. 

There are various ways to reach an agreement: 

• Direct negotiation meaning you and your ex-partner may be able to discuss and agree on the terms of the settlement yourselves. 
• Mediation in which case a neutral third-party mediator can help facilitate discussions and guide you towards a mutually acceptable agreement. 
• Solicitor-led negotiation meaning your divorce solicitors can negotiate on your behalf to reach a settlement. 

It’s important to remember that the vast majority of cases are settled out of court. With tens of thousands of financial remedy applications made each year, according to the latest Ministry of Justice statistics, reaching a private agreement is often more timely and cost-effective. Litigation should always be a last resort.

Special Considerations for a High Net Worth Divorce

When substantial assets are involved, the process becomes significantly more complex. High Net Worth Divorce (HNWD) cases often feature financial structures, international assets, business shareholdings and complex trust arrangements. 

While principles of the Matrimonial Causes Act 1973 still apply, their application requires specialist expertise. The definition of “needs” is often interpreted more generously and the “sharing principle” (the starting point of an equal division of matrimonial assets) plays a more prominent role. 

If your situation involves substantial wealth, we would recommend seeking advice from an expert HNWD solicitor like our director, Henry Venables who specialises in these complex cases.

Step 5: Formalising the Argument

Once you have reached an agreement, it’s important to have it made legally binding. A verbal or informal agreement is not enforceable by a court. 

Your solicitor will draft a Consent Order, which documents the terms of your settlement. This is then sent to the court for a judge’s approval. The judge will review the order to ensure it is fair and reasonable before sealing it. 

Once sealed, the Consent Order is a legally binding court order.

Securing Your Future

Negotiating a financial settlement for divorce is a journey that requires diligence, honesty, and a focus on fairness. By following a structured approach, you can complete this challenging process effectively. 

The law, supported by the guidance from trusted bodies like MoneyHelper, is designed to achieve a fair outcome that allows both parties to move forward in their lives on a stable financial footing. 

Given the complexities involved, especially in cases with substantial assets, seeking expert legal advice is a necessity for protecting your interest and securing your future.

At Maguire Family Law, our team of experienced divorce solicitors offers discreet, comprehensive support throughout the process with specialist expertise in high net worth divorces.

Contact us today to discuss how we can help you achieve clarity and confidence during this challenging time, ensuring your case receives the expert attention it deserves.

References

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

Matrimonial Causes Act 1973, c18, s. 25. (UK).

Ministry of Justice. (2024). Family Court Statistics Quarterly.

MoneyHelper. (2024). How to divide your money and belongings when you separate. 

Office for National Statistics. (2023). Divorces in England and Wales: 2022.

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