When you are going through a split with a partner, money matters may not be forefront of your mind, especially when you have children to worry about and look after their emotional wellbeing. However, getting the practicalities sorted as early as possible, especially around financial planning for divorce, is highly advisable. It gives you peace of mind that you will be able to afford what you need to live comfortably, post-split.
When considering how to prepare for divorce financially, there are many aspects to bear in mind around income, outgoings and long-term future planning. Things like salaries, pensions, savings, investments, business interests, rental income and inheritances can all come into play. It is vital to seek professional legal advice when looking at financial planning for divorce. There are several stages to navigate, from initial discussions through to mediation and preparing a financial statement for divorce.
Seek immediate advice around financial planning for divorce
When you have engaged a solicitor to help you with financial planning for divorce, there are a number of areas that you will need to discuss with them. Divorce and money management can be highly complex, depending on the assets that both parties own, jointly and separately. It is also a good idea to employ someone to give you financial advice, tailored to your specific circumstances. Other sources of help can be found in property valuation experts who can let you know how much any houses, flat, commercial premises etc are worth.
Work out the numbers
Work with your financial advisor or solicitor to draw up a list of income and expenditure for both parties. Be as comprehensive and accurate as you can, as any discrepancies or attempts to hide income sources will complicate arrangements further down the line. Once you have an accurate and up-to-date picture of the financial situation, you can start to plan what to do and how to divide assets for the best outcome for everyone. This will different for each divorcing couple, as situations will not be the same around children, health issues, other responsibilities, earning potential and more. Financially preparing for divorce is not always clear cut and rarely quick to achieve.
Budget for the future
Financial planning for divorce requires you to take a longer-term view, as well as deal with immediate responsibilities. Think about how your circumstances might change., For example, will you need to pay for childcare if your ex-partner is no longer around all the time to handle that. Will you have to move house, and what are the costs associated with that? Are you losing access to a vehicle so need to buy or rent another to get around on a daily basis? Will you need to cover a mortgage alone, or raise the money to buy your partner out of their share of a property? All of these questions will affect what money you have in the future – and this needs careful forecasting, planning and saving for as quickly as possible.
Split the assets
Think very carefully before agreeing on how any marital assets should be split. You may be keen not to rock the boat, or to appear greedy or overly demanding, however, it is your responsibility to ensure that you can walk away from the union with enough to keep you going until you find your feet in your new life. This is especially true if you are going to be the main care for any children or dependents from the marriage or partnership.
Think about what is best for children – to stay in the family home or move somewhere else with their primary carer. Consider the future of any jointly owned businesses – is it better to walk away with a settlement or keep working in the business to ensure its survival? Likewise, splitting pensions can be complex, so always seek professional advice before coming to a formal conclusion over this vital aspect of divorce financial preparations.
The same goes for jointly held savings and investments. Can they be split down the middle evenly, or is there a case for one party receiving all or more of the financial pot to help safeguard their financial future? There could also be implications around capital gains tax that should be carefully considered and mitigated against.