Divorce is a complex and often painful process.
No one enters a marriage expecting it to end in a divorce, but it happens around the world. Although each divorce is different, you are not alone in your experience.
Getting legal support is sensible. A good family law specialist will help you navigate the legal process. Taking financial advice will help shape the money aspects of separation too. Financial expertise early in the divorce process can have a lifelong, positive impact.
Taking control
An experienced financial planner will help you to make good decisions.
This means reorganising and taking control of your financial future. Together, we look at the life-long financial implications of the (often bewildering) choices. When emotions are high, deadlines can slip. Paperwork is the last thing on your mind. A supportive adviser can help with the burden of decision-making and administration too.
A fair share
Dividing savings and investments is likely to be relatively straightforward. In England and Wales, the courts look at all your accounts. In Scotland, savings built up during a marriage are used in settlement calculations. Often, it’s pensions that cause the arguments and issues. This is especially true where one partner has been the primary earner. There are tax consequences and charges to consider. Taking future earnings into account will be part of your final resolution. Expert financial advice will help you understand the issues. You’ll know when to compromise to achieve a fair outcome.
If you are dividing ISAs on divorce, they may lose their tax benefits. ISA transfers can only be made to the same individual or a former married or civil partner on death (not divorce). Expert guidance can help ensure your investments keep their tax-free status.
Did you know there is a window of time where the spousal tax exemption applies and then ends? A delayed divorce settlement can go beyond this timeframe. Where there is no exemption, capital gains tax may become payable. The Finance Bill (2022-23) should allow divorcing partners more time to make transfers without penalties. Your financial planner will have all the relevant information in their armoury. They’ll guide you towards a sensible solution – one that works for you and your ex.
Making sense of the stats
The divorce rate in the UK has generally been decreasing over the past few decades. In 2020, there were 101,055 divorces in England and Wales, a decrease of 2.9% compared to the previous year.
Sadly, the average duration of marriages ending in divorce in 2020 was 12.5 years. In the same year, the most common reason for divorce was ‘unreasonable behaviour’ (46%). Perhaps not surprisingly, the highest divorce rate was among couples aged 45 to 49. The second highest divorce rate is between the ages of 50 to 54.
The recent fall in the divorce rate may be the start of a new trend. It seems likely that the COVID-19 pandemic has affected the number of divorces. The lower figures may simply be due to delays in the process.
A fresh start – in your 30s
Divorce in your 30s can be a challenging and emotional experience. In this life stage, financial planning can be your opportunity for a fresh start and security.
When steering a course through to happier times, you’ll need to consider the following:
Budgeting
After a divorce, creating a budget is crucial to ensure that expenses and income align. A budget can help you keep track of your spending and ensure that you can make ends meet.
Debt Management
Divorce often leads to dividing debt and setting out your financial obligations. A debt management plan will ensure that outstanding debts are promptly paid off. Your immediate aim is likely to be financial stability. Longer term, you’ll have different goals. If you’re in your 30s, you have plenty of time to save. Having a plan will give you peace of mind.
Asset Division
A financial planner can help you understand the division of assets in a divorce. You may have to move home and scale back spending. Reviewing the impact of financial separation is part of your adviser’s skill set. They’ll help you focus on your future financial well-being.
Retirement Planning
Divorce can have a significant impact on your retirement savings. A financial planner will look at your longer-term plan. They’ll help you get back on track to meet your retirement goals.
Investment Planning
Your investment strategy may need to change. A financial planner can help you re-evaluate your portfolio. Their recommendations will help align your goals and risk tolerance.
Going solo – in your 40s
Divorce in your 40s can have similar financial implications as divorce in your 30s. You should also consider these impacts:
Closer to Retirement
For those in their 40s, retirement may feel closer. This means that the division of retirement assets becomes even more crucial. A financial planner can help you save enough to support yourself in retirement.
Established Finances
People in their 40s may have more established financial positions. You’re likely to have more accounts, more assets, and fewer debts. Your financial planner can help you navigate a fair and efficient division.
Children’s Education
Those in their 40s may have children who are thinking about university. Protecting your children will be foremost in your mind as you separate. Seek advice. Your adviser will provide strategies for supporting your children’s further education. You’ll be free to focus on their emotional well-being.
Divorcing – in your 50s
Divorce in your 50s can present even more financial challenges. Retirement may already be in your sights. Your asset values are likely to be much higher too. Here are a few ways that financial planning can help if you’re in your 50s and navigating divorce:
Retirement Planning
The division of pension assets can significantly impact both parties’ financial futures. A financial planner can help determine the fairest way to divide retirement accounts. With a plan, both parties can build sufficient savings for retirement.
Estate Planning
Estate planning is an important consideration for those divorcing in their 50s. A Will is essential, so you can direct your wealth to the people you love. Make sure your estate plans are updated to reflect your new circumstances.
A proactive approach
Divorce at any age can be overwhelming. With a proactive approach, the financial impact of divorce will be more manageable. Your adviser will work with you to achieve your immediate and long-term financial goals.
A qualified and experienced financial planner will make you feel supported. You’ll have all the information you need. You’ll find it easier to navigate the financial aspects of divorce with confidence. When a relationship ends, good advice is essential. You can have a bright and stable financial future with the proper support.
If you’re found yourself unexpectedly separated or divorcing they get access to my ‘Take a Breath’ series of video’s with top tips on how to negotiate this difficult time.
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