Finalising a divorce without a formal financial settlement can leave you vulnerable to future financial claims and liabilities, and prolonged legal ties to your ex-partner. Even if your split is amicable, circumstances can change, and without legal closure,you may face financial uncertainty long after the divorce is finalised. Taking steps to secure a formal financial agreement can provide peace of mind and long-term stability.
Future financial claims
One of the biggest risks of divorcing without a formal financial settlement is that your ex-partner can make financial claims against you, sometimes years later. In the UK, financial ties remain open indefinitely unless a court order explicitly severs them. This means your income, savings, property or pension could still be subject to a claim, even if you’ve both moved on.
You may trust a verbal or informal agreement, but life is unpredictable. If your ex-partner’s financial situation worsens, they may seek additional support, and without a legally binding agreement, the courts may grant their request. Securing a consent order ensures that financial matters are settled and neither party can make future claims.
Lack of legal closure
A divorce legally ends a marriage but not a financial relationship. Without a formal settlement, financial obligations between you and your ex remain unresolved, creating uncertainty.
A legally binding financial order provides closure by clearly outlining the division of assets, debts and any future financial responsibilities. Engaging a specialist divorce solicitor can help ensure you navigate this process correctly, whether through a consent order (if both parties agree) or a financial remedy order (if disputes arise).
Potential for conflict
Without a formal agreement, unresolved monetarymatters can lead to future disputes. Even if you and your ex-partner initially agree on financial terms, differing interpretations or changing circumstances can spark conflict.
Disputes over property, ongoing financial support or pensions can become contentious, adding stress and potential legal costs. By formalising your financial arrangements through a court order, you create clear terms that both parties must follow, reducing the likelihood of conflict. This can be especially beneficial if you share children and want to maintain a cooperative relationship.
Impact on future relationships
Moving on after divorce should be a fresh start, but unresolved matters from a previous marriage can complicate new relationships. If your ex-partner makes a claim years later, it could affect your new family’s financial stability, putting strain on your current partner.
A formal financial settlement protects your future, ensuring past monetary ties do not disrupt your new life. It allows you to plan with confidence, free from the worry of unexpected claims.
Tax implications
Failing to secure a formal financial settlement can also lead to unexpected tax liabilities. In the UK, asset transfers between spouses are exempt from Capital Gains Tax (CGT), but this exemption ends upon divorce. If you transfer assets informally afterwards, you could face significant tax bills.
A properly structured post-divorce settlement can help optimise tax efficiency. Consulting a solicitor or financial advisor can help to ensure that your agreement is legally sound and financially beneficial.