Divorce is undoubtably emotional and stressful, during which time everyone involved will need support and sound advice; personal, legal and financial. Parting couples will have to make difficult decisions, and after family considerations, organising their finances is likely to be among the toughest.
Some financial positions will be much more complex than others, especially when dependent individuals are involved, but to help our mutual clients during a challenging time, we’ve put together six immediate financial matters to consider:
1. Splitting property
The marital home will need to be divided, as will possessions and assets. Some might be more sentimental than others, but as we’re sure you’ll agree, it is much more productive to encourage all parties to be honest and fair when trying to split years of shared belongings.
Whether property will need to be sold or bought out by one party, coming to a mutual agreement with appropriate assistance will save time, heartache and ultimately could save money. Being aware of and fully understanding legal obligations from an early stage, especially if financial dependents are involved, is essential.
2. Sharing debts
Ideally, all debts should be repaid beforehand, but we understand this isn’t always possible with mortgage liabilities. Getting credit reports from companies such as Experian or Equifax for both parties is the simplest way to identify true debt and its legal owner, be it in joint names or individually.
Short-term borrowing with high interest rates such as credit cards and overdrafts should be dealt with as a priority and care should be taken to ensure credit ratings are not adversely affected, as they will be vital when arranging a new mortgage or rental agreement.
3. Joint accounts and cash
Assuming an amicable agreement, beyond sharing the joint cash account balances, there will be an immediate need for funds for everyone. There are professional fees to consider and living costs are likely to change quickly; it’s incredibly important to manage short-term cash flow needs and mitigate the risk of getting into debt.
If necessary, as Chartered Financial Planners we can prepare pension sharing reports that can be used in court to detail how pensions should be shared to produce equal incomes. If this isn’t necessary, liaising with pension providers for the exact details of schemes is important, as an ex-spouse is likely to be nominated to receive benefits if the pension holder dies. The BlueSKY team are here to make the process as simple and effortless as possible.
5. Protection policies
From joint life assurance and critical illness cover, to car insurance; it’s to be expected there will be several jointly held policies which providers will not let be divided. The vast majority of insurance will need to be reviewed (even individually held policies) as the level of cover required post-divorce, or the named beneficiary (the person who benefits in the event of a pay-out) in most circumstances are likely to change. To help decipher an appropriate level of cover, in the most cost-efficient way, talk to one of the BlueSKY team.
6. Life beyond
To many, it may not feel like it in the moment, but there is life beyond immediate circumstances and support from professionals is imperative. We will address immediate challenges and look to the future as we plan to secure clients long-term financial stability and freedom. Having a coherent, measured and professional financial plan during a time of crisis will prove invaluable in the long run.
As circumstances, needs and goals change over time, a trusted relationship with periodic reviews from Chartered financial planners, will help secure an independent financial future.