You are here: Home - Household Bills - Understanding -

Dealing with divorce: tips for a smooth financial separation

0
Written by: Michael Copeland
09/01/2017
Find out what happens to your assets, debt, savings and pension in a divorce.

Agree on assets

During a divorce it is a legal requirement for both people to disclose the value of all their assets, commonly known as full disclosure. This covers income, savings, investments, property, pensions and any other assets. Something many people do is not to clarify the value of their assets. If you are unsure on the value of an asset seek a third party valuation and avoid rough estimates.

Once everything has been outlined it is best to try to reach an agreement on as many financial assets as possible – doing it via a solicitor can add further expense.

Divide debt

As a couple you may have joint loans, credit cards and a mortgage and just as you need to agree and divide assets, you also have to do the same with any outstanding debts. A trap some people fall into is thinking they won’t be liable for debts. With any joint loans you will both still be liable for any outstanding figure and failing to pay it could affect both parties’ credit ratings. Agree with the other party how the debt will be paid and put arrangements in place.

It’s key to avoid running up new debts during a divorce too. While the focus is on short-term survival, don’t ignore any bills that come in. They can quickly rack up and add more costs further down the line. To avoid falling into debt, prioritise what you need to pay first, be it rent, mortgage or bills.

Think long-term

Avoid short-term decisions that could affect your long-term finances. It might seem an easy decision to take money out of long-term savings or deferring pension payments to free up cash for immediate needs but this could leave a gap in long-term savings and pensions,

reducing your future retirement income. Once everything is settled it is a good idea to try to repay yourself.

Plan your pensions

For many people their pension will be their biggest asset after the family home and it should be divided during the proceedings. It’s easy to think this is as simple splitting the pot. A pension’s value in retirement could be much more significant than its current value and people need to consider this.

Pensions can be split a number of ways including pension offsetting and pension sharing. If one of the parties is already retired the rules will be different again, so it is important you seek advice about the possible outcomes to make sure everyone gets a fair result.

Get advice

Finally, get in touch with a trusted financial adviser. It sounds obvious but just as you’d seek legal advice for matters of the law it is important to seek financial advice from a professional too. All too often people rely on their solicitor for financial matters, which isn’t always their area of expertise.

From dividing assets to managing family commitments, getting divorced is a difficult time, but having an understanding of how to handle a smoother financial separation can help to make it a little easier.

Michael Copeland is senior area manager at Wesleyan

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
houses
Housing market finishes on 6.5% growth in 2016 but slowdown predicted

House prices rose 6.5% year-on-year in the final three months of 2016, driving up the value of the average UK...

Close