divorce and finances - Page 5

Finances After Divorce

Published on
Finances after Divorce
Mary Waring
Independent Financial Advisor

In an ideal world you will receive sufficient settlement from the divorce to ensure you can achieve all that you want to achieve after divorce, lead the life you want to lead and not run out of money.

When there are sufficient funds available there’s no reason why this wouldn’t be the case.

But what happens if there isn’t sufficient funds for this?

Various settlement options will be looked at as part of your divorce negotiations and it’s important to choose the option which is best for your circumstances.

My experience is that frequently the wife wants to stay in the family home and the husband wants to keep his pension intact. He views the pension as “his” money compensating him for the hours he’s put in at the office.

Staying in the family home can often be an easier option for the wife. In a period of extreme upheaval and uncertainty it can be really comforting to have some stability, and it causes the least disruption for the children.

Accepting the home in the settlement also solves an immediate need whereas pension income seems a long way off and therefore much lower down the list or priorities.

However, before you decide this is the outcome you want, you must consider the wider implications of being awarded the home and therefore potentially receiving no pension share.

If you do not work outside the home, or you are in a part time role for child care reasons, you may have very little pension income in your own right.  What will you live on when you get to retirement age?

Basic state pension is currently £5,727.80 each year, which only comes to £477 per month. The government is currently proposing an increase to the state pension to £144 per week. But that is still only £624 per month.

country house
Accepting the home in the settlement also solves an immediate need

Once you have paid all your utilities (gas, electric, water, council tax etc) and bought your food there is likely to be very little left. Therefore it’s very important to take this into account at the negotiation stage.

Don’t wait until you are close to state pension age to consider it. The closer you get to state pension age the less time there is to plan and take corrective action if you are unlikely to have sufficient retirement income.

Women will often work on the basis that there is an option to downsize the house. But do you know how much that is likely to raise? Emotionally it can often be difficult to downsize the family home at this stage since you have memories of happy family times there. You’ve also probably got used to having the children/grandchildren come to stay and having their own rooms.

The time to look at your options for when you retire are during the divorce negotiations themselves, even though retirement may be many years in the future. Retirement will often seem such a long way off that it’s pushed to the back of your mind.

Decisions about your divorce settlement are more than just what share of the joint assets will be awarded to you. It also then comes down to a decision as to what assets you will receive to make up that share. Don’t assume that splitting your assets 50:50 and you getting the house will automatically be the same outcome as splitting your assets 50:50 and you downsizing now and taking a pension share too.

Work with your financial adviser to see which option allows the funds to last the longest. This will then be financially the route which is most appropriate for you. Now of course, there are emotional issues at stake at this time and so decisions won’t just be made based on logic.

The figures may show that your money will last longer if you downsize now, but it’s not emotionally something you feel up to at the minute. If so, revisit this decision in say a year’s time. Maybe at that stage you will be feeling emotionally stronger and ready to take this step.

The important thing is that when you make the decision about your financial settlement, you are making it based on all available knowledge. You may still choose to make your decision based on your emotional response. But at least you know this, and then address the issue again at a later stage.

Mary Waring

www.mary-waring.co.uk

You might be interested in

financial-advice-and-divorce
/

5 Financial Divorce Myths – Financial Advice and Divorce

Published on
Finances after Divorce
Mary Waring
Independent Financial Advisor and Author of  The Wealthy Woman: A Man is Not a Financial Plan: A Woman’s Guide to Achieving Financial Security

If your husband has dealt with the family finances during the period of your marriage then it’s very likely that during the divorce negotiations you can feel fearful and overwhelmed when looking at the financial issues.

There are a few myths worth looking at around finance:

Myth 1: You aren’t entitled to a fair share of the assets

Don’t assume that if you have earned less than your husband that this will impact on your settlement. Women often earn less; either because they are a stay at home mum, maybe the family finances don’t require them to work, or they do a lower paid/part time role due to child care issues.

Frequently women believe that if they haven’t contributed financially to the marriage that they will be entitled to a lower share of the joint assets on divorce.

However, this is incorrect. The court will base the settlement on the financial needs of both parties, especially the one looking after the children.

If it’s a short marriage, typically you go will leave the marriage with what you bring in. But in a longer marriage all assets (and in fact all debt) are pooled and the aim is to divide equally, as much as possible.  This is regardless of who owns which assets.

Myth 2: Your husband will be financially penalised

Do not assume that if your husband wants to end the marriage, or maybe his affair was the reason for the divorce, that the law will in any way punish him financially to your benefit. I often hear women saying “I want him to pay” for what he’s done.

But the law is not there to punish one or other spouse. Its aim is to split the available assets according to each parties needs. The court does not consider moral right or wrong:

If your husband has left the marital home, he will need to be rehoused. If there are children to the marriage he will need an appropriate sized property so that there is sufficient room for the children to stay when they spend time with him.

Myth 3: You will always be able to maintain the same lifestyle after divorce

Financial Advice and Divorce
On this basis, maintaining the same lifestyle just may not be possible.

Following divorce it’s very likely you will want to maintain the same lifestyle as you enjoyed during your marriage.

If there are sufficient funds to go round that’s likely to be the outcome.

However, consider what will happen if there isn’t enough money. The same income that was being used to support one household during the marriage will now be used to support 2 households following divorce.

On this basis, maintaining the same lifestyle just may not be possible.

You must consider the joint finances. If there is not sufficient money for you to stay in the family home, the law will not uphold your request.

Listen to what your family solicitor advises you will be an appropriate outcome. They have years of experience and can predict the likely outcome with some confidence.

Work closely with your financial adviser to see if it is possible to stay in the family home. Look at the various options, budgets, and what it is you can afford.

 Myth 4: Keeping the family home is the best option

Financial Advice and Divorce
Myth – Keeping the family home is the best option

My experience is that frequently the wife wants to stay in the family home and the husband wants to keep his pension intact. He views the pension as “his” money compensating him for the hours he’s put in at the office.

Staying in the family home can often be an easier option for the wife. In a period of extreme upheaval and uncertainty it can be really comforting to have some stability. It causes the least disruption and upheaval for the wife and the children.

However, before you decide this is the outcome you want, you must consider the wider implications of being awarded the home and therefore potentially receiving no pension share.

Consider what income you will live on when you retire, especially if maintenance will cease at retirement age.  There is always an option to downsize at a later stage, but do you know whether that will realise sufficient funds?

 Myth 5: Thinking you are a “common law wife”

Frequently women who are co-habiting with their partner and not married (or not in a same sex civil partnership), think they have the same protection as a wife.

Although we often hear the term “common law wife”, there is infact no such thing in law.

It is a widely held belief among women that if you are cohabiting but not married that you will have the same rights as a spouse. However, this is a myth, and this is the case regardless of the period of time you have been living together and even when you have children.

Following separation your partner will need to provide financially for the children. However, there is no legal requirement for him to provide for you or provide a share of the wealth created during your relationship.

What should you do?

Getting to grips with finances during this very difficult and emotional time will often be challenging. But you only have this one chance to get the right settlement for you and your children. Work closely with your professional advisers to ensure you understand the implications of each of the financial options and you choose the one that’s right you.

Mary Waring

Sign Up for Mary’s ebook – The 7 mistakes women make when getting divorced and how to avoid them

 

You might be interested in

/

Importance of Financial Goal Setting

Published on
Independent financial Advisor
Paul Gorman
Principal Partner
Beaufort Planning

In my previous article we spoke about the importance of gathering accurate data and piecing together your financial jigsaw. If you follow the steps suggested you’ll now hopefully have a good understanding of your current financial position.

In this one I’d like to take a look at setting goals, and working out what is it from a financial perspective you’d like to achieve.

If at all possible, don’t rush into this and also remember ( and this bit may be difficult ) to try and be realistic in the context of your circumstances as you will need to agree all of this with your partner and if you can’t then the courts will.

You may have a reasonably straightforward financial situation with straightforward aims that you want to achieve, or your financial situation and your goals may be more complex.

Whatever your situation, don’t just think of the immediate here and now.

Whilst, that’s likely to be the most pressing for you, also try and think and plan ahead:

  • · Short term – the next five years.
  • · Medium term – five to ten years.
  • · Long term – more than ten years.

Write down all your thoughts, think them through, discuss them with your lawyer. It may be that you decide to eliminate those that are of least importance to you or refine others having taken time to think things through.

If you need help with budgeting and calculations there is some excellent information available at The Money Advice Service.

The calculators help to explore potential settlement scenarios and are able to give you an indication of how financially matters may pan out for you post divorce.

By going through these steps and those suggested in my previous article, you are now hopefully in a position of being better informed about your financial position and have some direction as to where you would like to get to.

Paul Gorman

www.beaufortplanning-westmidlands.co.uk

You might be interested in

1 … 3 4 5