The process of going through a divorce is not cheap, particularly if it is a contentious one. Limiting financial damage during this process is crucial, which is why we felt it was an important matter to touch upon.
There are two pieces of good news.
The passing of the Divorce, Dissolution and Separation Bill in January of this year proved to be a monumental step forward in divorce law, and it finally put an end to the ‘blame game’ that couples too often had to play in order to be granted a divorce.
Secondly, figures from the Office for National Statistics (ONS) suggested that 42% of all marriages in the UK end in divorce but that people are staying together for longer — the average marriage lasts for 12.2 years.
But the cost of getting divorced is rising. Lawyers say the average UK divorce bill has risen by 17 per cent over the past three years, and now stands at more than £70,000. (Obviously, the wealthier you are, the higher this figure is likely to be.)
There are four main costs associated with getting divorced:
- Court fees
- Legal fees
- Any financial settlement you must pay to your spouse
- Any child maintenance you are required to pay
So why are we telling you all of this, and how can we as financial advisers help you and others through this difficult time?
Recent research from Legal & General highlighted that a third of all people who divorce over 50 think the process of divorce ends up being financially unfair (38%) but only 3% of people actually seek financial advice.
The reality is that making the most of your cash, rethinking your long-term financial goals, and ensuring your money is still invested as tax-efficiently as possible, are vital after your bank balance has received this shock. As with any other major life change, it is important to involve a financial adviser in the process to make sure you have taken a holistic approach to your changed finances and life goals.
A divorce can certainly call your retirement planning into question e.g. the pension of one of you may have to be shared between you and your ex-spouse, and support both of you independently, which is not easy.
One of the biggest mistakes you can make in a divorce is thinking that the family home is the biggest, best, greatest (whatever you want to call it) asset to be given up when you separate from your spouse.
The matrimonial home is a very emotional asset. But the roof over your head is just that – your house doesn’t generate income to pay the bills, rather it is the source of many bills.
This further emphasises the need for a financial adviser during this complex process. The financial security provided by pensions and other investments can be far more important, where we can also help with a comprehensive cash-flow analysis and projections.
Yet interestingly, Legal & General’s research also showed that during a divorce, just 12% of couples consider pensions when dividing assets. Ignoring this can leave one or both parties at a significant financial disadvantage.
What can you do right now to protect yourself financially?
It is worth checking, if you don’t already know, who’s name the house is in. When the property is owned in the sole name of your spouse and the property was lived in by you both as the family home, it is important that you register your home rights with the Land Registry.
This is a relatively straightforward exercise, which registers your interest as a charge on the title register. This means that the property cannot be sold without your knowledge. So do check to avoid any potential issues further down the line.
This latter tip might surprise some of you. But you would be surprised how some spouses might fall foul on this issue.
The subject of divorce and the associated financial advice is an extensive one. We will cover off further aspects of this topic in more detail in upcoming newsletters. For now, if there is anything you would like a hand with, please do get in touch.
