The good news is that the divorce rate has fallen in recent years according to the ONS, from 14% in 2004 to 10.8% in 2012. However, January is known as ‘divorce month’ among lawyers and the emotional stress of a divorce can take up huge amounts of energy and mental effort, so the last thing most people need is to have to deal with the complications of financial arrangements during a split too. Here are our top money tips for people going through the divorce process.
1. Don’t automatically prioritise the family home
Most people underestimate the value of pensions in a settlement, especially ones that come with guarantees, for instance, final-salary schemes. Although the family home may seem like the biggest asset, you need to consider if you will be able to afford the upkeep and also if you will have enough time and disposable income to make up any retirement shortfall. It may be worthwhile getting an adviser to help you understand the pros and cons of each asset so that you can get to grips with how your overall financial wellbeing will be affected.
2. Plan properly
In order to have an idea of where you stand financially after divorce you need to figure out your financial status as a married couple. Gather all of the documents relating to your assets and liabilities e.g. savings, investments, pensions, mortgages and loans. If possible make sure that you collate the information from the most recent statements and if in doubt order an up to date one. Create a pre-divorce budget plan and a post-divorce budget plan and don’t forget to include all the possible income streams, such as child benefit, if relevant. Don’t forget holidays, haircuts and even the cost of the pets!
3. Check the status of any debts
If your partner has run up debts in their name then the money to settle these debts can only be taken from their share of the assets. However if the debt is in a joint name then you are both liable. It would be wise to check your credit rating to see how you are affected. Looking back to your budget planner (mentioned above) will also help you to make sure that you do not get in to any further debt after the divorce. You need to make sure that your finances are going to be as robust as possible post-divorce.
4. Hire professionals that you understand and trust
Regardless of your financial situation you should speak to legal and financial professionals to get the best guidance through the divorce process. Usually you will be offered a free consultation which will enable you to get a feel for who you like the most. Prepare a list of questions beforehand so that you don’t forget anything. When it comes to a financial adviser it is important to understand the qualifications of the person who is advising you, their experience and also whether or not they are independent.
5. Common-law wife
It's an urban myth that if you are cohabiting but not married then you have the same rights as a spouse, even if you have children together. Be aware of this important distinction. Plan your finances as a couple but also plan individually too. It's important not to leave yourself exposed in the event of a split.
Lisa Conway-Hughes, financial planner at Westminster Wealth Management said: “The financial aspect of a divorce settlement is not straightforward. Ask a professional to help you with any financial planning, especially pensions advice, before you make any irreversible decisions regarding your divorce settlement.”
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