Getting divorced can be an incredibly overwhelming time, and the emotions and legal element often occupy the forefront of people’s minds.
However, it is important to keep the financial implications of divorcing in mind as well.
As we enter 2024, mediation will play an increasing role in the divorce process, but despite this shift away from traditional legal support it is important to remember that financial advice and support are still vitally important and should not be overlooked.
Financial support will also be of increasing value for divorcing couples in 2024 as we see finances becoming more and more stretched by longer settlements and higher legal costs.
Reaching an amicable financial agreement that suits both parties is key, and if a financial planner can be involved at the outset it will make a considerable difference to the complexities that can occur if the divorce becomes protracted.
There are some key things couples divorcing this year should keep in mind to avoid common pitfalls.
The family home
Many people wish to retain the family home in preference to other available assets.
However, while it is important to have security and stability, it is also crucial to consider how the client will pay for the costs and maintenance of the home if they do not have adequate income.
They should also think about how the house will meet their future financial needs, and the tax implications of retaining the house.
We recommend using a "what do I need now" approach, focusing on what is required to enable them to rebuild their life and start a new chapter, while also ensuring adequate assets are available to live on for years to come.
The pension
Aside from the family home, a pension may be the next biggest asset in value, and is very often overlooked.
A pension has the advantage of being able to provide an income in the future, perhaps after maintenance has stopped, making it an extremely valuable asset in any divorce.
Pension rules were changed many years ago to make it easier to split the pension in a divorce, whether that be through pension sharing or earmarking.
While it may not seem the most appealing asset if a couple is divorcing at a younger age, it is important to look at the bigger picture and keep its long-term value in mind.
The hidden assets
It is crucial to not just accept all information provided by the ex-spouse at face value.
Every asset and source of income is included for disclosure during the divorce process; this includes property, pensions, savings, investments, household assets, cash and limited companies in which each partner has an interest.
Therefore, if a person is considering a divorce, they should use all means available to become aware of every marital asset, including any possibility that their partner may not be fully disclosing all assets.
