Financial Realities of Separation and Divorce – 5 Initial Considerations
Posted on in Family Law
When navigating the emotional and financial complexities of separation and divorce, understanding the financial realities is crucial. This article outlines five initial considerations that can help individuals make informed decisions during this challenging time.
Review your expenditure
When you separate from your spouse, it is important to review your daily and monthly expenditures to consider how any change in your household income will impact you. It may be necessary to adjust your budget to align with your new situation. It will often be necessary to put in place an interim financial arrangement to ensure mortgage repayments and household outgoings will be met pending a formal resolution.
What are your goals?
Think about your short-term and longer-term goals. One of the key factors a Court will consider is both parties’ reasonable current and future financial needs. This will also include a consideration of how both of your housing needs can be met from the available assets. It helps if you can focus on the future and think practically about what your needs will be.
The matrimonial home
This will commonly be the largest asset a couple will own, and a decision will need to be made over what is to happen with it; whether it is possible for one spouse to buy the other out, or for it to be sold, for example. The matrimonial home will often hold strong sentimental value, but it is important to think realistically about what should happen to the property.
If either spouse wishes to remain in the property, they will need to contact their existing mortgage lender to see if they would agree to the mortgage being transferred into their sole name. They will need to prove their ability to meet the monthly repayments on their own.
Consider how the mortgage repayments will be met pending a formal resolution being reached in respect of the finances. Where there is a joint mortgage, both spouses will remain jointly and severally liable until the property is sold or transferred into a spouse’s sole name. This means the lender can pursue either spouse to recoup any funds owing if a payment is missed for any reason.
Pensions
The Court aims to achieve fairness in financial settlements that meet both parties’ immediate needs, such as housing, and also their future retirement needs. It will be important to understand both your own and your spouse’s pension positions, which will require you to request a Cash Equivalent Transfer Value from all of your pension provider(s).
Pensions are capable of being shared even if you or your spouse is retired and some or all of your pensions are already in payment.
As with your immediate household budget, it may also be necessary for you to review your pension and savings goals in line with your changed circumstances. Where pensions are involved, it is always advisable that you seek your own independent financial advice.
Wills and Life Insurance Policies
You should update your Will or put in place a new Will to reflect your wishes post-separation. Any terms that refer to your spouse will automatically cease to take effect once the Final Order in the divorce proceedings has been granted, which legally ends the marriage.
Any life insurance policies in joint names with your spouse will need to be reviewed. You will need to prepare to take out a policy in your sole name post-separation and divorce.
How can Tozers help?
Tozers can provide you with the guidance and support you need during this challenging time. If you have questions about the divorce process, asset division, or any other related matters, we are here to help. Contact Tozers today to schedule a consultation, and let us guide you through this transition with confidence and clarity.