My relationship breakdown came as unexpectedly as a tsunami. It was a quiet Sunday morning, while I was expecting our first baby, and after 11 years of marriage. It felt like utter devastation; I had never imagined myself not married to this man or having to bring up a child on my own. Long story short, he was leaving me for someone else.
To start with, it felt like death by a thousand cuts. On top of the emotional fallout, there were the practical and financial aspects to deal with: running a home, caring for my baby, getting divorced and selling the house. And, with a husband in financial services, I hadn’t been the one ‘in charge’ of the money. It was a steep learning curve.
The divorce took two years and, in that time, I changed bank accounts, found a mortgage deal and negotiated the best maintenance plan I could for my daughter and myself. My financial education was a by-product of getting divorced, but it’s been the most amazing and unexpected legacy.
It’s made me passionate about helping other women take control of their own finances (preferably without ever hitting crisis point), particularly as research shows that 33% of women in relationships would not feel financially stable in the event of a marriage breakdown.
My advice is simple: don’t leave yourself financially vulnerable and make sure any settlement you agree on if you break up provides you with long-term financial security. Here are the key things you need to know if you’re splitting up...
GET YOUR FINANCIAL HOUSE IN ORDER
If you take an active role in managing your joint finances, you’ll not only feel the benefit now, but as part of any discussions on separation (when you have to draw up a list of assets: property, pension, investments, bank account, insurances). The more aware you are of your spouse’s or partner’s financial position, too, the better.
KNOWLEDGE IS POWER
‘Lots of arguments between couples come from people not understanding their rights and having incorrect expectations,’ says Laura Naser, family lawyer and author of The Family Lawyer’s Guide To Separation And Divorce. A fact-finding meeting with a lawyer will save a lot of angst. Visit solicitors.lawsociety.org.uk or resolution.org.uk.
Get professional financial advice during the early stages, too. ‘Alongside the legal process, this can help you feel more supported and ensure that the division of assets is carried out in the best way, and ultimately puts divorcees and their families on a better financial footing for the future,’ says Zoë Bailey, director of financial planning at wealth management group Tilney. Visit financialplanning.org.uk/wayfinder.
KNOW YOUR RIGHTS
People often believe that if they have not contributed financially to the marriage, they will be entitled to a lower share of the joint assets if they divorce. This isn’t true. If you are divorcing or dissolving your civil partnership, it doesn’t matter whose name an asset is in or who’s the higher earner or primary carer for the children, the court has wide powers to transfer assets between spouses. There's no one size fits all formula for how much you will get, it's all about a fair division of assets.
‘The courts look at what the needs of the family are – children first, then the spouses. The court now accepts the contributions of the homemaker to be equal to the financial contribution,’ says Naser.
THE MYTH OF COMMON LAW SPOUSE
Cohabiting is increasingly popular, with more than 3m couples in the UK not married and choosing to live together. But, if you split, you are not as well protected under the law.
Any jointly owned assets will be automatically included in any financial split. What you don’t have is any right over your partner’s own assets, unless you’ve made wills specifying your wishes or have a cohabitation agreement.
Children of cohabitees are protected to some extent under The Children Act 1989 and statutory child maintenance will apply. The law can also allow for lump sums, transfer of property and additional top-up of maintenance if a parent isa high earner, or the child has specific needs, but only if they are under 18.
THE PROPERTY V PENSION TRAP
Research shows that a third of divorcing couples or those in civil partnerships don’t know that they are entitled to a proportion of their ex’s pension. Debora Price, professor of social gerontology at The University of Manchester, says, ‘People often see the house versus the pension as a trade-off but they do this, in many cases, without finding out what the pension is worth and without thinking about later life. A pension could be worth as much as your home.’
Figures show that, typically, women build up smaller pension pots than men, partly due to career breaks and lower average salaries. Also, our life expectancy is longer. You need to think about what income you will live on when you retire and treat pensions the way you would any other asset when you’re negotiating your financial settlement.
KEEP THE COSTS DOWN
Think of the divorce and financial settlement as separate matters. You can file for divorce or dissolution online at gov.uk/divorce (a court fee of £550 applies), but dealing with the financial side of things can be more complex, costly and lengthy, involving legal and professional fees. You’ll find practical advice on the costs involved in divorce or dissolution at moneyadviceservice.org.uk.
Legal aid is now only available in situations involving domestic abuse or, in some circumstances, via means testing. If you don’t have the funds to pay for your divorce, there are litigation loans available. Apply for these via your lawyer.
Mediation (where a ‘referee’ helps advise you both on the law and guide you to an agreement) could be more cost effective and quicker than going to court. Use familymediationcouncil.org.uk to find a local mediator.
Arbitration is also increasingly common. ‘An arbitrator may charge £5,000-£8,000, but is much quicker than going to court. The courts are really struggling with the pressure of so many cases and litigants in person,’ says Naser.
Visit the Institute of Family Law Arbitrators (ifla.org.uk)to find out more. The decision is final and binding.
THE BOTTOM LINE
Talking about finances at all stages of your relationship can help set parameters that will protect you. Consider putting in place a cohabitation agreement or nuptial agreement (pre- or post-marriage) so your boundaries are clear.
Emma-Lou Montgomery, associate director for personal investing at Fidelity International, says, ‘For women who want to make sure they are financially prepared for their future rather than relying on a partner’s income, the priority will be saving as much as possible.’
For more financial advice, sign up to our free fortnightly newsletter at redonline.co.uk/ffnewsletter.
This article ran in the March 2020 issue of Red. Subscribe to the magazine here.
Subscribe to Red now to get the magazine delivered to your door.
Like this article? Sign up to our newsletter to get more articles like this delivered straight to your inbox.
You Might Also Like