Dealing with a divorce: practical steps to help with the finances

This can be an extremely emotional charged time for the couple, with concerns over future lifestyle, ability to continue to maintain the same standard of living once assets are split.

1. Set out what you reasonably expect from the agreement. Your lawyer will be able to advise what the family court is likely to grant if a personal agreement cannot be found.
2. Gather all documents on any financial plans you have, such as old pensions, bank and savings accounts, any investments either held with an institution or directly held. If you cannot reach a personal settlement and are going through the courts to reach an agreement, you will need to complete form E, which discloses all your assets. You are legally required to do this, and there can be consequences for not doing so, or if you disguise some of your assets.
3. Familiarise yourself with the family finances. In most marriages, one person usually takes charge of the financial issues. If this hasn’t been your responsibility, make sure you familiarise yourself before the marriage formally ends. It may be things like school fees, mortgage payments, utility bills, even simple things such as accessing a bank account and understanding online payments.
4. If you have a mortgage, check what the redemption penalties are if the house is sold and the mortgage redeemed. This could be an unnecessary cost. Many people are unaware that one partner can take the mortgage product on, even if the marital home is to be sold, which saves having to pay a redemption penalty.
5. Think about what’s important for you to get from the settlement. For example, you may have young children which means you may not be able to work full-time, so need an income now. You may want to stay in the marital home. Or you may want to maintain pension benefits that have been accrued. Try to take the emotion out these decisions, and be as practical as possible, especially if you are trying to reach a settlement without legal help.

1. Get a financial adviser involved, if they aren’t already. This should be done when the financial consent order is drawn up by the court. It’s particularly important to have a financial adviser if there are pensions involved as they can help transfer benefits from one ex-spouse to the other.
   This may be the first time you will have worked with a financial planner. They will explain what the structure of the policy is, how it can be added to any existing plans to reach future financial goals or be used to supplement future income needs.
2. Decide if you want any life insurances to remain in place, and who the beneficiary will be in the event of death. This is really important, especially when there are school fees to be covered from one person’s income. It’s worth insuring against this if those fees are paid from ongoing earned income.
3. Decide who will control any plans that are in place on behalf of the children, such as Junior ISAs or child trust fund. Issues can arise when former spouses try to exert control in different directions. Sharing of information is vital on these plans, and it’s best for one person to make the large decisions such as how to invest the capital.

1. Re-establish long term goals and objectives. This involves understanding what money is available to be added to existing plans or drawn down to provide a regular income.
2. Update your pensions death benefit nomination form. This tells the pension provider who you wish proceeds to be paid to in the event of your death. It’s the one thing that most people tend to forget to change following a divorce. But it’s an important thing to do, otherwise your money could be paid to someone who you don’t want to receive the benefit.
3. Ensure all remaining life assurance policies are up to date with nominated beneficiaries. Most of the time the policies are written into trust, normally for the benefit of a new partner or children. You must check that the intended beneficiary isn’t the former spouse.
4. Update your will. Divorce doesn’t revoke the former will in place, meaning that your former spouse could benefit in a way you wouldn’t want them to in the event of death.
5. Put utility bills and bank accounts into sole names.
6. Review of any power of attorneys that are held on each other. A former spouse, or even an in-law, may still be nominated on trust documents or nominated as a power of attorney. It’s vital that these are reviewed to prevent any difficulties in the future.

If you haven’t been in charge of the family finances before, it may take a while to be comfortable with your new financial situation. A financial adviser can add real value to you as you adjust to your life post-divorce, especially if there is a need to rebuild assets.

They can:

• advise on how to build an emergency fund of cash assets for short term emergencies
• provide guidance on medium- and long-term plans and what products are most suitable in the pursuit of those goals.
• help you visualise what your future could look like by using tools such as a cash flow model.
• Deal with paperwork such as nomination forms, trust documents as well as ensuring you have appropriate insurance cover.

At what can be a difficult time, professional advice can give you practical financial guidance, allowing you to focus on looking forward and building the life you want. 

Find out more about the benefits of financial advice, and how we can help you.