Finances are usually the main focus of divorce negotiations as they are tied up with pretty much every other aspect of the process – assets, debts, property, children’s arrangements and even future considerations like pensions and retirement. Getting all the necessary documentation together can feel a bit like an audit but it’s important to make sure that you have a thorough and accurate financial overview of both your joint and individual circumstances in order to move forward and reach a fair settlement.
Your solicitor is your best guide for working through this process, as every situation will be unique, but there are several important financial considerations that everyone should be mindful of:
- Delayed Financial Settlements
Under current divorce laws, it’s possible for couples to separate before finalising a financial settlement, so long as agreements are in place to complete the process in the future. This often looks like an attractive option for couples who just want to get the whole thing over and done with but this is, if you’ll excuse the pun, a bit of a false economy. You’ll still have to deal with financial issues – which could end up taking even longer after you’re divorced due to added complications that arise when you no longer have the financial privileges of being a married couple, for example: an exemption from capital gains tax on transferring assets between you. In an extreme circumstance, if one of you should die before the financial settlement is agreed, the surviving party would lose the right to claim spousal pensions and lump sums, exemption from inheritance tax, and could even end up with a large tax bill.
In all cases, it’s far better to prioritise your financial settlement and make a clean break, without the risk of further complications and issues down the line.
- Overlooked/Hidden Assets
Make sure both of you declare a full rundown of your assets and liabilities. Don’t forget about shares, ISAs, bonds, interest in private companies, maturing endowment policies and pensions. It’s best to lay everything on the table and figure out the best way to divide up the pot in the fairest and simplest way than try to hold back or minimise assets that may arise later and cause further disagreement… Don’t try to hide or give away money or assets to friends and family in the hope of reducing what you have to share with your spouse – non-disclosure is treated as fraud, and a genuine attempt to hide financial information during the divorce process could result in a fine or further legal action.
- Future Living Costs
When reaching a fair financial settlement it’s important to figure out what your budget will look like post-divorce. Consider the cost of running two separate homes, moving, living on one income, taking sole responsibility of bills and running costs, co-parenting or maintenance… Your future budget may be quite different to your previous joint income and you’ll need to factor in any additional spending to determine what a fair settlement, lump sum, or maintenance agreement looks like.
Pensions are too often overlooked when it comes to assets, even though they can be the second most valuable financial consideration after property. Get your pensions valued and check your pension rights when it comes to divorce. There are several ways to deal with pensions (we have a whole separate blog about the process here!) and as with most financial issues it will largely depend on your circumstances, the other assets available, and whether you want to make a clean break or make arrangements for ongoing spousal maintenance.
There may also be tax consequences post-divorce, depending on your situation and the assets involved. Income tax, inheritance tax and capital gains tax can all be affected, along with potential tax implications to do with dividing up pensions. Once again, your solicitor is best placed to advise on how to plan for minimising any additional tax costs.
- Legal Fees
Don’t forget the cost of divorce itself! On average, the Petitioner’s costs will be higher than the Respondent’s, but the cost of divorce also depends on the duration and complexity of the process, and whether or not you’re able to reach an agreement out of court. When it comes to legal fees, it doesn’t matter who divorces who or why – though if one of you behaves particularly badly during litigation, ignores order, or fails to turn up at court, causing costs to increase, they may be ordered to pay some of the other party’s fees. Your solicitor will be able to guide you to try to find ways to keep your costs down (the best way is to try to come to an agreement with your ex as amicably and collaboratively as possible!) and help you to incorporate these costs into your budget and settlement.
- Get Expert Advice
In all cases, always seek the advice and guidance of an experienced solicitor before you make any decisions about your finances. For all the reasons above, there may be aspects you haven’t considered or repercussions you may not fully understand. Every case is different and individual, and while a 50/50 split is a general starting point there are many variables that may adjust the scales according to what other assets are involved. The aim is to reach a resolution that lets you both walk away with a fair settlement and the minimum of animosity during the process. So rely on your solicitor’s expertise to help you get there!
To speak to a friendly, experienced solicitor on any aspect of separation, divorce, and reaching a financial settlement, get in touch with our team at Frances Lindsay & Co.Tags: divorce lawyer Beaconsfield, divorce lawyer Berkshire, divorce lawyer Buckinghamshire, divorce lawyer Henley, divorce lawyer Maidenhead, divorce lawyer Marlow, divorce lawyer Richmond, divorce lawyer Richmond upon Thames, divorce lawyer Thames Valley, divorce lawyer Windsor, divorce solicitor Beaconsfield, divorce solicitor Berkshire, divorce solicitor Buckinghamshire, divorce solicitor Henley, divorce solicitor Maidenhead, divorce solicitor Richmond, divorce solicitor Richmond upon Thames, divorce solicitor Thames Valley