Rules of Disengagement – Divorce and Financial Planning

Nigel Rowland
Principal
Rowland Financial Planning

Divorce or separation can cause significant personal upheaval, but dealing with important practicalities can prevent difficulties becoming worse.

Unfortunately, more than 40% of UK marriages end in divorce.1 While divorce and separation can be emotionally and psychologically damaging, they can also come with huge legal and financial implications.

Amid such upheaval, it is all too easy to overlook such issues, but doing so can make a difficult situation worse, and leave you unnecessarily out of pocket. In some cases, inaction can prolong the process significantly.

By taking a few appropriate and timely steps, those affected can more easily navigate the legal and financial risks ahead, while potentially reducing some of the stresses associated with divorce and separation.

“Firstly and most importantly, seek professional advice,” says Suzanne Lurie of Linder Myers Solicitors. “Professionals can assist and guide you through the process and, whilst it might be an expense, advice at the outset can often help to ensure a smoother process and avoid problems later. Legal advice is essential, but do not disregard advice from your financial adviser or accountant.”

Having sought out the appropriate professional help, there is a number of steps that Lurie believes should be taken – or at least be properly prepared for.

Get your papers in order

One job that might seem mundane but can prove vitally important is to organise your paperwork. Personal documents are often fundamental to working out divorces, and ready access to the appropriate papers can be enormously beneficial as you navigate the process.

“Valuations will be required of all assets, including property, pensions, investments, and share portfolios,” says Lurie.

“If you have these available, it will help with any initial discussions. The same applies to any liabilities you may have, including mortgage, loans and outstanding credit card balances.”

If you have any joint accounts or credit cards, you should let the financial institution know that you are separating. This may lead to the accounts being frozen, and so you may wish to open a new account.

You may also wish to consider how you protect other forms of information. For example, it is worth tallying up who may be able to access your online accounts, and changing your passwords if necessary.

It might also be useful to create a record of relevant events by keeping a diary. “A diary can help you to navigate difficult contact arrangements with the children, should this become a problem later,” says Lurie.

Legal matters

Whilst divorce proceedings will invariably involve legal challenges, it is of course possible that the two separating parties will reach an agreement without legal advice.

If that happens, Lurie stresses the importance of ensuring the agreement is written into a court order – called a ‘consent order’. This will ensure that what you agreed remains legally binding on you both.

Yet even if such an order is agreed, there are other legal questions to consider and review. If you have a Will and a lasting power of attorney (LPA), these will certainly need to be looked at.

“Divorce does not annul a Will,” says Lurie. “Instead, any gift made which benefits your partner takes effect as if that person had died at the date of the decree absolute – the legal document that formally ends a marriage.”

This means that any gifts made to your partner will pass to other beneficiaries or become part of the residue of the estate, potentially against your wishes.

If you have appointed your partner as your executor, then this clause will be cancelled, which could leave you without an executor.

In separations without divorce proceedings, the Will also remains valid – again, this may be against your wishes. Whether divorce affects an LPA will depend on how it is written. You may need to consider whether to change your attorneys, although you can elect your former partner to be your attorney if you wish. If you do not have a Will or LPA, it would be wise to ensure that you do.

If a consent order cannot be agreed, there are still alternative routes to try before heading to court. Lurie maintains that court proceedings are generally treated by professionals as the last resort.

“Separation and divorce does not have to be acrimonious,” says Lurie.

“One route is for you and your partner to meet with a mediator, who is trained to help resolve disputes and help you reach an agreement, but who cannot take sides or give advice.”

Others might consider turning instead to ‘collaborative law’.

Under this approach, each party appoints their own lawyer, and negotiations to seek an agreement are done face-to-face with all parties present. Should this approach fail, then you will need to appoint a new lawyer to represent you in court proceedings.

Childcare

Many couples will also face the challenge of helping children through the process.

“If children are involved, it can be helpful to inform teachers so that they are aware there will be changes at home,” says Lurie. “This has a dual benefit. Teachers will understand better if work is late or behaviour deteriorates, but it will alert you to any issues the children may be having, should they struggle to deal with the separation.

If they are struggling, you may wish to seek advice from teachers or medical professionals on what counselling is available.”

After going through the considerable process of preparing for a divorce or separation, it can sometimes become clear separation is not, in fact, the ultimate answer. In such cases, some couples benefit from the relationship support provided by organisations such as Relate, which can provide significant support.

Will writing and Lasting Powers of Attorney involve the referral to a service which is separate and distinct to those offered by St. James’s Place and are not regulated by the Financial Conduct Authority.

1 Office for National Statistics, November 2015.

About Nigel

I provide a lifestyle financial planning service and wealth management advice to clients both within the City of London, and more widely throughout the South East of England. My office is based in Clapham Village near Worthing in West Sussex.

I have always worked within the financial services industry. My career started with eight years in domestic banking, followed by two years as an area building society manager, then eight years as a life office consultant dealing with professional advisers (financial services, tax and legal) specialising in pensions and investment planning.

As a consequence, I have now established many working relationships with individuals within this sector due, in part; to the insight and understanding that I have for their specific financial requirements – whether these be personal or corporate.

I am committed to ensuring that my industry knowledge remains relevant and current by placing strong emphasis on my personal development towards Chartered Financial Planner status. This, along with the pride and dedication that I place on developing solid personal relationships with my clients, ensures that I am able to offer a rounded, professional and principled service.

Outside of my business, I am married to Vanessa and have two grown up children. I am a keen 5-a-side footballer and have a passion for fast cars. The local community is also important to me and I am the Responsible Financial Officer for Clapham Parish Council.

Call me now to book a time for an initial no-obligation meeting, on 07770 770627 / 01903 871699 or email me on nigel.rowland@sjpp.co.uk

The Partner Practice represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the group’s wealth management products and services, more details of which are set out on the group’s website at www.sjp.co.uk/products. The ‘St. James’s Place Partnership’ and the title ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.

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