Financial planning for divorce

Recent changes at The Ministry of Justice are designed to allow more couples to apply for divorces online.

Currently being piloted in three areas, simple smart forms are set to allow more couples to complete their divorce online.

Whilst simplifying the process for divorce and also reducing costs is to be welcomed, we still meet clients who make straightforward mistakes when agreeing their financial division of assets. Getting qualified advice from both legal and financial advisors can make a huge difference to how the settlement you achieve provides for you long-term. Understanding which assets the family shares and how they could be taxed now and in the future, as well as what investment risk they are taking, can make a big difference to your negotiating strategy.

So, if you’re tempted by the online forms, then make sure you also follow our top five tips to a clear, fair divorce settlement from a financial perspective:

1. Get the best legal advice you can afford early on – Understanding the process and expectations as early as possible means you can approach discussions with your ex-wife or husband from a position of knowledge. Too often we see one side optimistically assuming the more financially savvy partner will play fair. It’s important to get yourself up-to-speed with the process.

2. Give mediation a real go – Once you know the process and possible outcomes, meditation can provide the best solution, especially if you share children and need to maintain good relations.

3. Involve a Chartered Financial Planner in early meetings – When you’re looking at your marital assets, what’s of value to you now is unlikely to be the best asset to secure your future. The much loved holiday home is unlikely to provide you with a regular income, and indeed currency movements, local taxes and maintenance costs can make it a costly asset in the long-term. Very often Investments are offered as part of a settlement, but pregnant capital gains (usually not chargeable on transfer between married couples) can be hidden and are not considered until the time of selling the asset. Capital gains tax could take up to 20% of the value.

4. Be realistic about what you need to secure your future – Clear, realistic goals applies to clients we see, both with cases at The High Court as well as local. Value isn’t the only consideration here – it’s the type of assets and what you need to secure your future.

5. Make sure your advisors are qualified and you are comfortable with them – Look for firms accredited by The Law Society – Your Divorce settlement could take a long time and you need to be confident that your team have your best interests at heart. A Chartered Financial planner should attend initial meetings to get to know you without charge and carry Chartered in their title. Advisors (or those registered via their firms) are registered with the FCA, so go to their website at www.register.fca.org.uk to search for their details.