If you are facing the prospect of a divorce or separation one area that is likely to be of considerable concern to you is the financial side of things.
In short are you going to be able to manage independently from your ex?
So, what are the top 5 financial questions to consider before you sign on the dotted line?
Have all the finances really been considered?
When considering a financial settlement with a client we break things down into three types of claims. The capital claims, which mean any properties you own, any shares or policies you have and any savings. Make sure you have thought about all of the capital you or your ex may have.
Then there is the issue of pension value and this includes any private pensions and the state pension which can have an added value. Many people are surprised to realise that a pension can be even more valuable than a property, so don’t underestimate the importance of looking carefully into this area.
Finally, we consider income which include any income from employment but from all sources including rental income or investment income.
Does the proposed split address your financial needs?
Does the settlement address your housing needs? Does it consider what you will need in terms of expenditure per month? Does it address your future needs in retirement, whenever that might be, even if still a long way off?
Does the settlement meet the needs of any children of the relationship?
If you have children make sure you have thought about how much it costs to look after them both now and in the future as they get older. Also, think about the cost of them continuing to study once they leave school and how they will support themselves.
Have you seen ALL of the financial information from your ex and is it accurate or is anything being hidden from you?
Make sure your ex has provided you with full details of their finances and ideally don’t just take their word for it, ask for documents in support. You want to be sure of the value of any properties by getting an independent valuation.
You will need to know the balances of any bank and savings accounts and the value of any pensions. You also want to know about any debts so that they don’t come out of the woodwork at a later stage and give you a nasty surprise. Make sure that the documents you do see make sense and the figures add up.
In most cases we encourage clients to go through a process of disclosure. You can do this voluntarily or, if you are asking the courts to make a decision on your finances, it will be a prerequisite. You do this by completing a Form E – we have a useful video talking you through what’s required in the Form E here.
Does it give you a good long-term solution?
Lastly, ask yourself whether in the long run you will be able to manage. Does the divorce settlement cover unexpected eventualities that can arise in life, such as big expenses. Don’t make the mistake of having jam today (lump sum of a £10,000 may seem like a lot of money, but not if it will be your only income or asset).
Perhaps the most important thing is to make sure your settlement has not been agreed in too much haste and when emotions are riding high. You really should get some advice to make sure the settlement being proposed is in your best interests, both now and in the future.