News and Analysis | Casey Goodwin | April 7, 2022
No-fault divorce: our tips for a financially fair settlement
With new no-fault divorce laws coming into force, we discuss what the changes could mean for finances, and how best to protect your assets.
From this week, married couples in England and Wales will be able to start divorce proceedings without apportioning blame, with spouse’s unable to contest a divorce once the other party has applied for one.
It’s the biggest shake-up in divorce law in half a century. The changes will make the divorce process simpler, and bring many benefits. However, speedier divorces could also lead to rushed financial settlements and an unfair sharing of overall wealth – in particular of pensions, ISAs and other investments.
Unfortunately, women are more likely to be negatively impacted financially when it comes to divorce. This is largely due to the fact that women tend to have lower savings and investments than men – and are more likely to work part-time, become stay at home parents or care for elderly family members.
At Path, over 50% of our clients are female. We often see the impact that divorce can have on those who suddenly find themselves overwhelmed with increased financial responsibility, or taking care of finances that they may not have previously dealt with.
We’d encourage anyone facing divorce proceedings to look closely at their finances – this is especially important for those who don’t earn as much as their spouse.
And remember, whilst divorce is the ending of a marriage or civil partnership, the financial settlement is still very much a separate part of the process.
With this in mind, we have put together list of financial pointers for those going through a divorce:
1. Find out what assets you and your spouse share
This may sound obvious, but many people- are unaware what money and assets they jointly, or even individually, own and where they’re held. It’s important to know exactly what you have before proceedings start, so having full and frank conversations about the value of assets and income is key. If you’re unsure – or this isn’t possible – a financial adviser will be able to point you in the right direction.
2. Don’t assume that you’re not entitled to your spouse’s assets
Very few people are aware of exactly what they’re entitled to. For example, just because your name isn’t on the mortgage, it doesn’t mean you have no rights over the property.
3. Consider the ‘cooling-off’ period as a positive – not a pain
There is now a period of 20 weeks between starting proceedings and going through with your divorce application – meaning a divorce will take at least six months or more to complete. Use this time to really review your finances and understand what you want – and need – from your divorce.
4. Work out what you want financially from your divorce
Whether you have children or just yourself to think about, really consider what you need from your divorce to secure your future finances. Plan for what you need rather than react to what you’re offered. Does the settlement include mortgage payments being covered, provisions being made for your pension, or being able to pay energy bills once you begin to rely on a single income?
5. Work with a financial adviser – not just a solicitor
Solicitors don’t have the detailed knowledge of the investment options open to you and the pros and cons of moving money from where it is already held, whether that’s in trust funds, pensions or ISAs. Make sure you get expert financial advice as well as legal.
6. Take time to process
Divorce is generally stressful and unsettling and can trigger many emotions. But working with advisers who share your values – and understand your situation – can relieve worries you have over your settlement and future finances.
7. Make sure your advisers listen to you
If it seems like the experts you’ve put your trust in don’t care or aren’t listening, then they probably don’t. You are dealing with enough already, so find new ones. Divorce can be stressful, unsettling and can trigger many emotions. But working with advisers who share your values – and understand your situation – can help relieve worries you have over your finances.
8. Do some good with your money
Use the fresh start to review how – and where – you invest your post-divorce money. If your investments were previously unethical, in the likes of oil or tobacco – now’s the time to do something about it.
If you’re facing a divorce and looking for financial support or advice, get in touch with us for a chat today.
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