How to manage your money after going through a divorce
Getting a divorce is never easy. Rarely do people give finances a thought until they are faced with the prospect of having to split it up amicably. While divorce settlements in the UK try to have a 50-50 split, this is not always the case. It depends on a case-to-case basis, which means that one party may receive a larger share of marital assets than the other. The principle is equitable distribution so that a party who may not be earning is not left at a disadvantage. In such circumstances, you would be looking to secure your financial security and arrive at a mutually agreed upon division of assets.
If you are getting a divorce, we will always recommend speaking to a financial adviser. Our advisers have put together a few things to remember when dealing with finances.
1. Going to court
It is not required that you go to court for a divorce. Unless you and your former partner are unable to agree on the division, the courts may be out of the picture. But it is a good idea to speak to your lawyer because you may not know the exact value of the assets you have. This allows you to get a clear picture of where your finances stand and what would be a fair share for each party. In this case, be sure to get a consent order from the court.
Having arrived at a decision does not mean that it becomes binding or that your partner cannot change their mind. A court order, on the other hand, can prevent this from happening. The order can be drafted by your lawyer with your partner’s and your signature on it and a court fee. If you are not dividing assets and simply walking away with what you brought into the marriage, a clean break order can also be used. These legal documents are safeguards against future claims for financial settlement years after a divorce.
2. Needs of children
If a divorce goes to court, the needs of the children, if any, will definitely be considered. This means that the parent who looks after the children at most times will likely retain the house. If the parents have decided to arrange for children’s accommodation equally, then the court will look to ensure that housing needs are also equal.
3. Marital & non-marital assets
Marital assets are those that you purchased together after getting married. Most assets that you will be dividing will likely fall into this category. On the other hand, non-marital assets are those that you or your partner brought into the marriage, purchased after separation, or were given to only one party by someone else. After basic housing needs are met, the remaining assets may be unequally divided between the parties based on unequal contributions they made.
Generally, these assets include property, jewellery, pension, savings, and even cars (i.e. valuable items).
4. Financial Dependence
If either partner is financially dependent on the other, paying maintenance is a possibility. While it is time-limited, the maintenance can go on for a long time. The principle is that if a partner stayed at home to raise the children or for other reasons, they might take time to be financially independent after the divorce. To avoid putting them at a disadvantage, this is the solution.
What to do
Divorce settlements may not be straightforward, but with understanding and communication between both parties, the process can be made easier. The goal is to arrive at a resolution that is beneficial to both. It is always advisable to avoid racking up joint debt, ignoring bills, or freezing accounts. Maintaining transparency will help keep potential problems at bay. And remember, it is okay to ask for help.
Speak to our financial advisers at Hoxton Capital Management if you need further guidance in planning your finances.
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