It’s a subject which often causes awkwardness within families. We all strive to have more of it but it is also one of the biggest causes of arguments, relationship breakdown, stress and more stress.

Knowing your finances can be empowering and you never know when there might be an unexpected change in your family circumstances.

Financial mediation – how does it work?

When it comes to dividing up the finances, I often hear “if this went to court it would be split this way” or “according to my solicitor, this is how much I should be getting”. You may ask what a “fair settlement” should be and the answers from solicitors, friends, family, and google will all give you differing answers.

It is true that the starting point is normally 50/50, however there are a number of factors taken into account which can move the line in favour or against one party or another. The matters which the court takes into account when considering a financial agreement are set out in section 25 of the Matrimonial Causes Act 1973.

There is no one answer and the final result will always depend on the individual case. You can get legal advice through the mediation process to ensure you are fully prepared and are comfortable that what you are agreeing to is ‘fair’.

There can be a lot of information and it can be over-whelming. Here are 5 simple steps of the process:

Step 1 – Completing financial disclosures

• In all financial cases, you will need to disclose all of your assets and liabilities to each other. You might not feel like you need to complete the financial disclosure as ‘you don’t have much’. However the purpose of completing the disclosure is to ensure both parties have comfort and reassurance that everything is in front of you, it’s for transparency so that the full financial pot is there for discussion – only then will you be able to have the discussions around how to divide it up.
• It is important for both parties to disclose everything, both in joint names and in your sole names. If you go to court, this is a requirement (via the From E) and it’s important for you both to know the facts around your finances.
• Examples of some of the information required: Property, savings, current accounts, investments, life insurance, pensions, debt, items of high value, other assets. You will also need details of your income and expenditure figures.

Step 2 – Exchanging financial disclosures

• The mediator will go through the financial disclosures in the first session and check that both sides agree with all the figures disclosed.  Evidence supporting the figures should also be exchanged between both sides. Sometimes, one party may need further reassurance around some of the numbers and the mediator will help with this.
• Once both parties are satisfied that everything has been disclosed, discussions can start around how to divide the financial pot. The figures exchanged will be used in the mediation process to facilitate the discussions.

Step 3 – Options and proposals

• There are various ways of dividing your assets, for example splitting the equity in the family home, or giving a lump sum payment to one party, or offsetting a pension against equity in a property or other assets, incorporating agreements on child or spousal maintenance.
• If children are involved, consideration must always be given to their needs first, for example accommodation for the children.
• I would always advise both parties to obtain independent legal advice at this stage, especially if the case is complex. It also helps to level the playing field and reduce the possibility of an unfair outcome, especially in cases where there may be power imbalance present.

Remember that fairness does not necessarily mean an equal division of the financial pot. The mediator will help to facilitate the discussions and help reach agreements.

Step 4 – Assessing affordability

During the financial disclosure, you will have disclosed your income and expenditure figures. Once agreements are made, it’s important to reality check the final agreements and assess affordability. Will your monthly incomings cover your monthly outgoing costs?

Both parties should feel comfortable that they have what they need to move forward with their separate lives. The aim at the end is for you to go away feeling that the arrangements are fair and practical to live and meet future financial needs.

Step 5 – Final documents

Once the agreements are made, the mediator will provide you with two documents:

• Open Financial Statement (OFS) – purely facts and figures containing everything you have both disclosed to each other – this is an open document and can be shared in court.
• Memorandum of Understanding (MoU) – this document contains details of all the decisions and agreements you have both made.  It is a legally privileged document but can be turned into a consent order to be made legally binding.

In order to have your agreement made legally binding by turning into a financial consent order, the court will need to see that you have come to a fair agreement. If there are any specific reasons or factors for consideration when making the final agreements, these should be included in the MoU.

Alternate options for reaching a financial settlement:

Mediation is not always suitable and the mediator will tell you if this is the case. You may agree on some matters but not all, or mediation can sometimes breakdown.

If mediation is not the right path, you can try solicitor led negotiation or apply directly to the courts by using the Form A. The mediator will provide you with the mediation certificate you will require in order to do this.

Finances can be daunting, but the more you know about your money, the better decisions you will be able to make. Remember… know your finances!