Are you currently going through a divorce? If so, then please read on, as it is important to understand the pro’s and con’s of applying for your Final Order of divorce before the financial matters are settled, so that you can decide whether it is best to apply before or after.
The Final Order of divorce is the document that legally ends your marriage from your ex-spouse. It is the final part of the two-stage divorce process, with the penultimate stage being the pronouncement of the Conditional Order. If you submitted an application for divorce before the new law was introduced on 6th April 2022, then you will recognise the Conditional Order as the “Decree Nisi” and the Final Order as the “Decree Absolute”. The content that follows applies to both scenarios.
The usual approach taken by solicitors in divorce proceedings is to advise their clients to refrain from applying for their Final Order, until they have a Financial Order in place that has been sealed and approved by the court. There is often good reason for this, but it is important to analyse the circumstances on a case-by-case basis, as it may be the case that waiting to apply for the Final Order is not necessary.
Firstly, if one party obtains the Final Order of divorce and then subsequently remarries before a sealed Financial Order from the court is obtained, they may lose some or all of their rights to claim against their former spouse. It is therefore advisable not to remarry until a Financial Order has been approved and sealed by the court.
Secondly, if the Final Order of divorce is obtained prior to having a Financial Order approved and sealed by the court, then there is the scenario where, albeit unlikely, one of the parties passes away unexpectedly in the middle of financial negotiations. In that scenario, if the Final Order of divorce has not been issued, the surviving spouse would be entitled to benefits that may accrue as a result of their status as a widow/widower. For example, in respect of any benefits from a pension or life insurance policy. Furthermore, if you are the party who has the more valuable pension fund, or a life insurance policy, then you may want to avoid any scenario whereby your spouse may benefit from those assets in the event of your death. If that is the case, then you may wish to apply for the Final Order sooner rather than later, which might be before you have obtained a sealed Financial Order from the court. If that is the case, then it is important that you have collectively considered all of the consequences mentioned in this blog before making a decision.
Thirdly, it is important to consider the individual assets of the marriage that are to be distributed, as some assets, such as trust funds, some pension funds and other complex assets, cannot be transferred except to a spouse. Therefore, if you are intending to transfer such an asset to your spouse, it would be wise not to apply for the Final Order of divorce until the Financial Order is approved and sealed by the court, to allow that transfer to take place.
Lastly, where the agreement you have reached with your spouse includes a pension sharing order, this cannot be implemented by the pension provider until you have obtained a Final Order of divorce. However, we do often advise clients to wait for a minimum of 28 days from the date of sealed Financial Order before you apply for your Final Order of divorce, as the pension sharing order is not fully enforceable for the first 28 days. This is so that you can keep your widow(er)’s pension rights as a surviving spouse whilst you wait for the order to become fully enforceable. Again, this advice will depend on the individual circumstances of each particular client, but will be the most sensible approach for the person who is to benefit from the pension sharing order.
In addition to the above, there can be tax implications upon transferring assets between spouses as part of a financial settlement upon divorce. The transfer of assets could attract tax charges, such as Capital Gains Tax or Stamp Duty Land Tax. The UK does tend to exempt transfers between spouses from the majority of tax’s and so, depending on the individual circumstances of the case, this may be another reason to refrain from applying for the Final Order of divorce until the Financial Order is sealed by the court. Please be aware that Sheryl Perry Solicitors is not regulated by the Financial Conduct Authority and therefore cannot give financial advice in respect of tax in the UK and we do always recommend to our clients, where necessary, to seek advice from a specialist tax advisor in this regard.
If you are currently going through a divorce and would like to discuss the above in further detail, please do not hesitate to contact us either by telephone (01245463243), via our website or social media. Proceeding to apply for your divorce before you have resolved the financial matters could have a substantial effect upon you, your rights and/or the financial settlement. Remember, we offer a free 30 minute consultation for all new clients.
Author – Summer Croft, Sheryl Perry Solicitors