March 2020

Separation and Divorce: How to plan your finances

Separation and Divorce: How to plan your finances

Our top tips for planning your finances during separation and divorce are:

Handling Debts

So long as you are married, all financial institutions will regard your debts as “shared” which mean you’ll both be responsible for the whole amount – not just your half.

This makes it important to civilly discuss splitting finances in a marriage separation. You should decide how much of your debt is joint and which is individually incurred. These could include bank overdraft, credit card debts, loans or hire purchase agreements.

Even if you and your ex-partner are talking to each other, it’s a good idea to make sure you have a plan for paying off your shared debts.

Making sure your children are provided for

If you have children, splitting finances during a separation can be complicated. The cost of daily living should be considered when you are deciding on a budget for the children, rent, groceries, clothing, school supplies, and field-trip outings should all be financial aspects that both parents are responsible for.

Are there extracurricular activities that require consistent finances? Perhaps the children are in a private school, take lessons of some sort, or maybe you and your spouse agreed to help finance their continued education. These are all things to keep in mind when deciding on a shared budget for your children.

Working out what to do with your home

What you do with your home depends on what you can both afford to do once you’re living separately, how much value (‘equity’) there is in the home and whether you have any children. Regardless of your situation it is best to try and talk this through with your ex-partner and agree a way forward – that way you can keep legal fees to a minimum.

Your ex-partner might be able to continue paying the mortgage on your home, or at least pay something towards the repayments, after they move out. However, you’ll need to come to a more permanent agreement. It might be better to have a clean break or you may want to stay in the home and buy your ex-partner out or there may be an alternative arrangement that works better. For example, if you have children, you might be able to stay in the house with them until your youngest child is 18 or finishes secondary education. You can then sell the house.

Dividing up your pension

If you’re married or in a civil partnership, you might be entitled to a share of your ex-partner’s pension when you divorce or end your civil partnership. You should try to reach an agreement between yourselves about what you want to do with a pension. How you divide a pension can depend on how much the pension is worth, but it’s best to speak to a financial adviser to ensure that you are getting the appropriate advice for your situation.

Sort daily finances

Figure out if the divorce or separation will cause a change in the household income. Things to consider in this regard include, power and phone bills, insurance policies (include life insurance, health and home insurance, property and car insurance), credit card bills, store card bills, tax records, bank statements, investment records and other financial commitments that affect your daily and monthly finances.

Get it in Writing

No matter how civil your discussions may or may not be with your ex-partner, should always get what you’ve agreed in writing. Create a shared document that you can use to document the discussions have – this helps to avoid any misunderstandings. This could include how you propose to treat the following:

  • Household budgets
  • Division of accrued items, such as furniture, appliances, and electronics
  • Division of assets including savings, property, investments, shares and pensions
  • Maintenance and childcare costs
  • Debts including credit cards, loans, overdrafts and hire purchase agreements.

If your financial position is complicated, separating your finances and reaching an agreement could take some time and you are likely to need professional help. See if any of these apply to you and contact one of our financial advisors to see how they could help you:

  • One (or both) of you owns a business.
  • One of you depends financially on the other.
  • One of you does not agree to the divorce or dissolution.
  • You have children who still financially depend on you.
  • You have been married or in a civil partnership for more than five years.
  • One of you has a medical problem or disability that affects your ability to earn an income.
  • One of you has given up work to bring up your children, which affects your ability to earn an income.
  • One of you has more assets than the other (for example, the house is in one person’s name, or one of you has built up a much bigger pension than the other).

Contact one of our specially trained professionals to find out how taking a Collaborative approach to your divorce or separation could help you.

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