- Divorce, Wealth management, Women & Money
Separation and divorce can be a difficult time, when numerous legal and financial practicalities demand attention while also navigating the emotional journey. It can be difficult to know where to start, how to prioritise what is most important, and make long-reaching decisions for the future.
We take a look at the top 10 most frequently asked questions we hear about finances during divorce time, to help with any thoughts you may be experiencing if you are going through this stage of life.
Information is key.
Actively listen, gather and understand information related to your finances (both separate and mutual). Make a list to give you clarity of thought.
Know your pensions
As a starting point, take a look at your pension statements. Perhaps get a state pension forecast, so you know where you stand. Think about where you have both worked over the years: how long did your partner work at each employer; is there a forgotten pension somewhere?
Listen to your partner when they talk about how much tax they have to pay, or if the stock market has fallen, and maybe ask “why?”, as this could indicate financial assets. Do they have any crypto currencies?
Become aware of how and where your household spends money. If you have access to a joint account and can safely have a look, be curious about where money goes.
Think about how much you might need. How will your life look financially? Most people assume their costs will halve after divorce. Whilst some costs may reduce, others will actually rise, and this can catch many couples off guard. For example, there will be two amounts of council tax and energy bills, rather than one. Think about what your costs will be, and what you really need. What about holidays and luxuries? What level of mortgage could you manage on one income?
Start speaking with different solicitors and get a feel for how they work and who you want to work with. This is about finding a solicitor who you can work with and who will understand you. If you use the legal route, you will have to tell this person things that you have never told someone before, so you need to be able to trust them and work with them, potentially over many years. Many solicitors offer an introductory consultation, which helps you to identify who and what you are looking for in terms of legal representation, and if you will likely need it. Listen to friends’ experiences without letting your thoughts be known, or subtly ask them questions about their experience. Most people who have navigated divorce will openly share their experiences and views on their legal teams. It’s also a good idea to look at reviews to see how other people rate their experience. Give yourself this opportunity and don’t rush a decision or panic. Take your time.
This is a difficult question as every case is different. The starting point is usually a 50/50 split, and everything is included in the calculation. Some couples are as specific as 50/50 on the sofa and the kettle. However, you may have pre- or post-nuptial agreements to consider, and ultimately the final amount will depend on how your divorce journey goes. Consider this as a process and try not to be fixed on one particular position. Have confidence in your legal representation.
In England, all divorce is now ‘no fault’. To apply for a divorce online, it costs £593 up front. If you use legal representation, each legal route and firm will charge differently. Court costs can vary depending on how you represent yourself and the teams you appoint. Along with legal representation, you may also wish to work with a financial planner and an accountant. A final figure really depends on the complexity of your circumstances, how the divorce process pans out, and the level of disclosure and co-operation you receive from your ex-partner. It is unwise to compare your situation to others; just stick to your own path.
Firstly, the basics: what are your needs versus your wants? You should consider short and long term needs.
Don’t fall into the trap of prioritising keeping the home over your longer term needs. Can you afford to keep the home indefinitely? Will it exceed your means – perhaps not immediately, but in, say, five years’ time? In reality, it could mean that you are asset-rich but cash poor, and you can’t eat a brick.
Many women are keen to keep the family home, but pensions can be the next most valuable asset and in some cases, worth more than the home. It is also worth thinking that a change of living arrangements could be good for you, so take time to think about the potential new opportunity, rather than pinning all hopes on keeping the family home at all costs.
The average woman has £49,000 in savings compared to the average man with £114,000, and £19,000 in pensions compared to £55,000, yet women live longer (83) compared to the average man (79). Having adequate contingency funds and retirement savings should be priorities.
The state pension should not be overlooked, as this gives a guaranteed income.
If you complete a Form E, be sure your needs section is accurate and truly reflects what you need to get by. Courts can take a dim view on changes once the form has been submitted.
If your ex-partner agrees to pay maintenance, consider what would happen if they die or become seriously ill. What is their sick pay like, and what happens when it stops? If you have children or other dependants, what happens to the primary earner if the primary carer is sick or dies? Can the primary earner still work, or will they need to reduce hours or pay for childcare and home help?
You should also think about your will, power of attorney, and the beneficiaries of any pensions you do have. Are your pension nominations up to date? If not, update these as a priority, to ensure your pension goes where you would wish it.
It is also worth considering more day to day practicalities, such as bank accounts and paying bills. Do you have a sole bank account? How are household bills paid? Do you need to change any passwords? What assets do you both have?
Who is in your support group? Who and how will you tell people? How will child access be arranged?
Typically, obtaining a full and honest disclosure of assets can be challenging, as these can be limited or falsified. This is why preparation is important, so that you are aware of anything that is missing or doesn’t sound right.
Also, really thinking about your needs.
Debt can be an issue, as it does not need to be proved unless asked, so can be fabricated to make a position appear worse than it is.
Timescales. Divorce is a lengthy process, especially if you use the court route as there can be lengthy delays and cancellations, even up to the last minute.
Accepting information at face value without challenging it. For example, accepting the financial details which a partner discloses, which could be very different to the court’s view.
Accepting the family home at the expense of a pension, and therefore taking a very short-term view.
Again, this is specific to your circumstances and what you feel is acceptable. Seeing a financial planner can really help, as they can build a cashflow forecast around any offer you receive, or conversely can help you to understand your current and future needs and work out a figure which suits you. It’s a great idea to engage with a financial planner early in your divorce journey to give you clarity of your financial situation and to help you understand what your life could look like.
Think about what you really need and prioritise. What are your reasonable and expected expenses to live? If you don’t spend £7,000 on holidays now, you can’t ask for this as it would be unreasonable. What are your housing needs?
Start gathering your financial information. Being organised helps, so perhaps have a folder (paper or digital) where you can store information by provider and date, so it is there when you need it.
Treat this stage like a business deal; take the emotion away, build your support team and include a financial planner and perhaps a divorce coach. Find a financial planner that you can understand and work with – you may be working together for a long time and they will support you through this tough time helping to take the emotion away from financial decisions you need to make.
Firstly, make sure this is really what you want. Divorce is a painful process for all involved and can be costly.
You will know when it is time to walk away but before you do, take a deep breath and get organised.
Depending on how long you have been married and what pre- or post-nups you have agreed, every asset and source of income is disclosed during the divorce process; this includes property, pensions, savings, investments, household assets, cash, limited companies in which you have an interest, crytpo, and any item valued at over £500 such as jewellery, artwork, handbags and golf clubs, amongst others.
If you use the legal route, you will be encouraged to disclose your assets via a form E which will include 12 months’ statements for every bank account you hold, evidence of pensions, savings, and more.
Mediation also requires open disclosure in order to agree a split.
Agreeing an assets split
Once all assets have been disclosed, a split is sought which works for you both. This may be a case of simply splitting the assets 50/50 or where one party has a greater need, the assets will be used to support that need first.
There really isn’t a way to protect your wealth so to speak, as all assets will be included for splitting. You can help yourself however by really uncovering what your need is, to ensure this is factored into the agreement.
Identifying needs and wants
Demonstrating what you will need can be relatively straightforward. “Need” is different to “want”, and what the estate can support is another question.
One strategy would be to employ a financial planner to carry out a cashflow forecast. This is a sophisticated tool that can be used for all manner of financial need, whether it is looking at what lump sum you need in a pension, how much you can spend per year from a settlement offer, or to see how the assets could be split to ensure an equitable outcome. This is an interactive profiler which can provide you with forecasting based on a number of different ‘what if’ scenarios and can help you see your situation from a variety of angles. For example, it could highlight how much maintenance might need to be paid, or the implications of one party buying the other out of the family home, or trading the pensions – all of which may seem straightforward enough, but the mid- to long-term effects should not be underestimated, particularly later in life.
In this guide we have tried to give you an overview of what to consider when you are thinking of, or going through, separation or divorce. We understand it can be complicated and overwhelming but with the right support in place, you can take control of your finances and life and move forward to a positive future.
To find out more, please contact us for an introductory discussion with our expert team.
Content on this page is provided for general information and is subject to change and does not constitute advice.
If you would like to know more for your own situation, please do not hesitate to contact us.
We would be delighted to discuss this with you in more detail, taking your circumstances into account.