Finances and Divorce
It’s a fact of modern life that as many as 40% of all marriages in the UK end in divorce. The break-up can be a traumatic time for all concerned, and brings with it the need to make financial arrangements that can have ramifications for years after the settlement is made.
There are no hard and fast rules governing how assets should be divided, although there is a broad starting point of 50:50. If the divorcing couple are unable to come to an agreement on the division of their financial assets, the court will decide how these should be apportioned between them, based on factors such as their age, earnings ability, property and investments, and role in the relationship (e.g. breadwinner or primary carer).The needs of any children of the marriage are always considered paramount.
The Marital Home
One spouse can buy the other out and keep the house, or the property could be sold and the proceeds divided. But if there are children, a parent will often want to remain there with them. In which case, any existing mortgage arrangements will need to be reviewed, especially as the other partner may wish to buy their own property. Its worth exploring all the options with a mortgage adviser, especially if both parties intend to purchase a property after the divorce.
Many people think that a pension solely belongs to the party named on the policy, but that’s not the case. A pension has to be considered in the division of assets. Pension assets can be apportioned in various ways, by
• offsetting the value of one spouse’s fund by transferring a lump sum, or other assets, to the other spouse
• splitting the pension fund into two separate pensions
• arranging that when a pension comes to be paid, a portion goes to the other spouse.
A decision will need to be reached as to whether policies are surrendered or retained. If they are retained, you will have to consider if the name on the policy needs to be altered and if the beneficiaries of any life cover need to be changed. If maintenance is payable and funded from the income of one party, it may be appropriate to take out further life insurance in case they die or become incapacitated and unable to continue to make payments.
A Clean Break
It’s important to have a Consent Order in place as part of the divorce settlement. Without one, either side could make further demands for income or assets. This could include demanding a share of any inheritance, lottery win or pay rise.
Planning for the Future
Post-divorce, it makes sense to discuss your revised circumstances with your financial adviser. You’ll need to reconsider your financial goals and review your mortgage, life insurance, savings and investment plans and you’ll need to remake your will. Reorganising your finances is an essential step in moving forward to a new life.
Here at Logic Wealth Planning we can help you take the next steps, whether it’s needing a Mortgage, or wanting help and advice with Pensions or Life Policies