Going through a divorce is likely to be a very stressful process. Both the emotional and the financial issues at stake side can make this process very difficult for both parties, and unfortunately, the number of divorces keeps on increasing.
Courtyard Solicitors wanted to inform our clients of the steps that can be taken to avoid the financial pitfalls of divorce.
When a marriage ends the emotional strain can be extremely challenging and dividing your finances can make the divorce process a lot harder.
There are certain things you can do to help this litigation process.
In terms of the legal process of divorce that is not complicated litigation. Generally, assets are divided equally unless there is a big issue where representation is needed to fix unequal contributions.
Courtyard Solicitors advise making an effort to create some kind of outline agreement together early on in the divorce process. In some cases, where emotions are running high and this cannot be reached, our family law specialist Jonathan Green, can help to mediate this agreement.
In the meantime you may wish to consider the following:
Close your Bank Accounts
Initially, you should close any joint bank accounts and open new ones in just your name, if you don’t have a bank account in your sole name anymore. Not doing this quickly, could complicate the situation and could even mean that your ex-partner being able to spend your savings.
Unraveling investments you both hold can be a little more difficult. There may be charges selling your joint holdings and splitting the proceeds between you and there may be costs involved again when you come to reinvest your share.
Consider your pension
If you are going through a divorce, thinking about your pension is probably going to be the last thing on your mind. However, consider that after your property, your pension fund built up by one or both partners is often the second largest financial asset owned by a married couple.
With such a huge asset at stake, it’s crucial to consider how this will be divided.
It is important that your pension fund is split fairly, which is particularly the case for women who depend on their husband’s provisions. Women are still more likely to be paid less than men and are more likely to take career breaks as they look after the children, which means there is a gap between the amount men and women receive in employer pension contributions. This could potentially lead to a large shortfall by the time a woman reaches retirement age.
“There are a number ways of splitting a pension pot, and it’s important that you understand all of the options available, along with the impact that could affect your financial situation going forward.”
It is important to contact your pension provider in order to find out what you are entitled to and to make any necessary changes to your pension fund.
Change your life insurance
If you have Life insurance cover it will protect your family and loved ones in the event of your death, the chances are that if you are divorcing, you will unlikely want the cash sum that your policy pays out to go to your ex-partner, so make sure that you check the terms of your life insurance policy.
Capital Gains Tax
If you are married you can transfer assets between you without being susceptible to capital gains tax. If you are divorced the tax relief does not apply, however, there is a window of opportunity to make adjustments to your assets, as you can transfer assets between you and your partner at any time in the same tax year without incurring capital gains tax.
If you are going through a divorce, try to transfer any assets between you in the same tax year that you separate in order to avoid a capital gains tax liability.
Protect your credit score
Inevitably you are likely to share many financial products and agreements with your ex-partner. In fact, your finances will be more entwined the longer you have lived together. Therefore, once you divorce, you will, therefore, need to build up your own credit report. Ensure that you look at your own independent score, and improve any low scoring areas if you need to. This will help you to get loans as you rebuild your life.
Change your will
If you had a will in place prior to getting married it will become void, however, the same rule does not apply when you divorce, and it is unlikely that your existing will is going to be appropriate to reflect your new circumstances. Ensure that you update your will as soon as possible to ensure that your wishes will be carried out after your death.
Courtyard Solicitors know that divorce can be a long and painful process, however, it can be made a lot simpler by getting your finances in order first.