Divorce and finances: How to complete Section 3 of Form E with confidence

When a couple decide to separate and divorce, there are usually some immediate and pressing issues to deal with. Making sure that the children’s needs come first and deciding where each person will live, will often take priority.

Once these matters have been addressed, attention inevitably turns to the financial side of things. One of the most important and often one of the most time-consuming steps in this process is completing section 3 of the Form E.

The Form E is the financial statement that a couple are required to complete when the Family Court is determining the distribution of their financial resources upon divorce or dissolution of a civil partnership. It enables each spouse to make full and frank disclosure of their assets, income and liabilities and it is an indispensable tool in the financial remedy process.

Outside of Court, a couple might also use a Form E when they are voluntarily discussing the financial aspects of their separation. A useable Form E can be found on the Government website, www.gov.uk-s – just click on the search icon and type in “Form E”. This disclosure is imperative to ensuring a successful financial remedy outcome.

How to complete section 3 of Form E

Sections 1 & 2 of the Form E are self-explanatory. The form describes the disclosure that is being requested. Section 3 is different. This section is all about ‘financial requirements’, i.e. what you need in terms of capital and income to maintain your household and lifestyle.

This is important because it will help persuade the judge how to distribute you and your spouse’s property, investments and pensions, what income orders (also known as spousal maintenance or periodical payments orders) to make and for how long those orders should last.

It is split into two parts:

Section 3.1 deals with income needs (e.g. food, fuel and clothing)
Section 3.2 deals with capital needs (e.g. a home, or a replacement car)

These need further explanation.

Completing section 3.1 – your income needs

In part 3.1.1 you need to set out the income needs (current and future) for yourself and for any dependent children so for example, household fuel, housing, car expenses etc. Part 3.1.2 is more specifically for the income needs of children living with you or those you provide for, so for example school meals, extra-curricular activities, and pocket money. The Form E document is silent here as to the types of things you should include.

In my experience as a family solicitor, the space provided will rarely be sufficient and so I would recommend using one of the continuation pages at the back of the Form E for extra space,or refer to a separate schedule which you can attach. My preference is to use an Excel spreadsheet for an income needs schedule, which can be updated as you go along – financial remedy negotiations can take months, sometimes longer to conclude and so your needs may well change during this time.

In your schedule of income needs you should consider every regular and irregular cost that you incur or expect to incur in the near future, albeit the key word is ‘reasonable income needs’. The following is intended to give an idea of what to consider but please bear in mind that it is not an exhaustive list!

Household costs (indoor and outdoor) – mortgage payments/rent, household maintenance, TV licence, satellite subscription, Council Tax, water charges, electricity, gas/oil, telephone, mobile phone, veterinary fees and pet insurance, cleaner, garden supplies and garden help.
Motor and other travel – road tax, insurance, service, MOT, repairs and tyres, fuel, road-side service (e.g. AA), parking, and train fares.
Personal – food and household goods, chemist/prescriptions, dentist/dental plan, optician, clothes, shoes, hairdresser, cosmetics, dry cleaning, lunches at work.
Leisure – holidays, travel insurance, days out, theatre/cinema/concerts and sporting events, adult education, coffee and meals out, Christmas presents, birthday presents, newspapers and other subscriptions, leisure club memberships.
Financial – endowment premiums, life insurance premiums, critical illness premiums, pension contributions, health insurance, loan repayments.
Legal – legal fees in connection with divorce and financial matters
Children – School expenses (including uniform, lunches, school trips, equipment etc), school fees, extra tuition such as music lessons, sports equipment and subscriptions, clothes, shoes, holidays, days out, meals out, pocket money, hairdresser, toys and games, holiday child-care/kids camps.

Monthly costs of things such as gas/electricity and council tax will be easy to identify from bank statements. Holidays, food and meals out will require a longer view of your bank statements. You could look at what you have spent on holidays during the previous year and divide by 12 to get a monthly figure for example.

Income needs can be set out as a weekly, monthly or annual cost – which one you choose doesn’t matter, but the detail does. It will be time consuming to work out, but well worth the effort. Under-estimating your income needs will undermine your case.

Conversely, while it might be tempting, you should never over-estimate your income needs. If you do, it’s likely that your spouse and their legal team will challenge your estimates and it could make your evidence look unreliable. That said, it is always best to prepare for some challenge to an income needs schedule. Your solicitor will be able to help with this.

While you can complete the Form E yourself, you can delegate the task to someone else to complete. Again, I would certainly recommend asking your solicitor to help. Some financial advisers will produce an income needs forecast. While the cost can be significant, it could provide useful. Again, your solicitor should be able to advise on whether this might be necessary.

Completing Section 3.2 – your capital needs

Section 3.2 is used to set out your capital needs requirement. The main capital need is usually a property, assuming that the family home will be sold or transferred between spouses. Where the precise capital need for a property is not known, it is best to look at comparatives to work out values of replacements.

Estate agent property particulars will tell you, for example, what a three bedroom property in the area where you want to live will cost. Make sure you can provide several comparisons to make the evidence more compelling and, again, seek advice if you are unsure on anything. The money you spend on professional fees could prove to be a sound investment in the long run.

Completing section 3 of Form E is an investment in your future

Completing the Form E, and particularly Section 3, can feel daunting at first. It requires time, honesty and a willingness to dig into the detail of your everyday life, everything from weekly grocery bills to the cost of replacing a family car. But the effort will be worth it. A carefully thought-through Form E helps ensure that any eventual settlement reflects not only what you and your spouse require now, but also what you reasonably need for the future including a pension.

A comprehensive Form E also reduces the risk of disputes further down the line. By setting out clear and well-evidenced information, you give the Court (and your spouse’s advisers) a reliable picture to work from. That in turn can speed up discussions, reduce unnecessary conflict, and give you more certainty as you plan ahead.

In short, while it may be one of the more time-consuming aspects of your divorce, completing the Form E with care is a crucial investment in your financial future and one that can make the difference between a stressful, drawn-out process and a smoother path towards a fair resolution.

Author: Alex Wilson is a partner in the family team at HCR Law.