Finance in Divorce – An Essential Guide

Divorce is a stressful time for everyone in the family, and financial matters can easily become the biggest factor of stress in the separation.

From joint assets, joint accounts, debt and family matters, finance in divorce can be a complicated issue.

This guide is designed to give you a basic understanding on all of the issues you could come up against during your separation.

*Note: For more details about our divorce services, take a look at our Divorce Advice page.

Initial Costs and Actions

In England and Wales simply filing for divorce costs ÂŁ410, and an application for financial proceedings is a further ÂŁ255.

On top of these costs each party in the divorce will be required to pay legal fees. It may be decided the the person with the most assets will cover the costs for both parties, but if this is not agreed then it is often difficult to get fees covered by the other party.

Where possible, it is often beneficial to sit and discuss financial matters in an informal situation prior to any court proceedings, in an aim to reduce costs later on. In this situation you can split your assets, and quickly identify contentious issues in the division of wealth. It is wise to have an independent mediator or lawyer to witness this discussion. In order to make this conversation run smoothly gather as much financial paperwork as possible, outlining assets, spending and debt that you share or have as an individual.

Assets

Over the course of your partnership, you and your spouse will have a number of assets that are shared and during divorce proceedings it often gets complicated when trying to split these.

Assets that can be included in a financial settlement include:

  • Property
  • Pensions
  • Business Assets
  • Overseas Assets
  • Assets held in Trust

Property – There are many ways in which people decide to divide the property they share. If there are children involved in the separation priority often goes towards the parent gaining custody of the children, as part of ensuring their welfare.

However, if this is not the case and property does need to be divided then your options are:

  • Bartering – where one spouse takes certain items in exchange for others. For example one may get the house, where the other gets the car and the savings.
  • Selling – selling the property to divide the proceeds is also a popular option in dividing property, but be sure you are both aware of the fees involved in selling and moving house and ensure this is affordable for you both.

Pensions – Pensions are an asset of the marriage and they too need to be considered in the financial proceedings of the divorce.

Your options here are:

  • Offsetting the value of one pension fund by transferring a lump sum or other assets to the other spouse.
  • Splitting the pension fund into two separate pension funds, one for each spouse.

Business Assets – Business assets do not always stay with the individual who has built up the business. Agreeing a settlement that allows the business to continue is often the preference, and there are different options on how this can be done:

  • One partner retains ownership of the business and pays maintenance from it’s profits.
  • One partner retains ownership of the business and borrows against it’s value to provide a lump sum to the other spouse.
  • The business is split into two separate businesses.

Overseas Assets – Overseas assets are legally included in those that should be considered in a financial settlement. However, often assets are moved abroad in order to hide the assets, so if you think your partner is doing this you should gain immediate legal advice.

Assets Held in Trust – Assets held in trust should also be declared in the financial settlement, if it is thought that the spouse would benefit from the asset. If one of the spouses has placed something into trust themselves it is only considered in the settlement if the other spouse is likely to have been a beneficiary of this trust.

Debt

As well as considering what assets you have to divide it’s also important to consider any shared debt you have. If it’s possible the best course of action is to pay all debts at the beginning of your financial negotiations. However if this is not an option, as you do not have the capital to do so, there are a number of options you face:

  • Agree to take responsibility for the debts in exchange for receiving greater assets from property division
  • Agree to let your spouse have the debts and the assets
  • Agree to share the debt equally. Be aware that with this option you are still legally responsible if your ex spouse does not pay.

Maintenance Payments

There are no simple formulae for working out maintenance payments. There are many factors involved, including:

  • Each partner’s needs, assets, and ability to earn income.
  • Standard of living before the break up
  • Length of marriage/civil partnership
  • Contributions each partner has made to the relationship.

Contributions are not just measured in financial terms. If one partner has played a significant part in running the home or bringing up the children allowing the other to earn the majority of the income then this is taken into account in calculating maintenance payments to reflect the value of the care giver role.

If your ex spouse is refusing maintenance payments you do have the power to enforce the ruling. By taking out a Financial Order the court is liable to enforce the payments. If your ex spouse you are not eligible to pay maintenance any longer, unless there are children involved in the marriage. Equally if the financial situation of your ex spouse improves you can appeal to the court to stop maintenance payments.

Child maintenance payments are different to the maintenance one spouse may pay another. The welfare of children is paramount in divorce settlings where there are minors involved. Any children under 16, or under 20 in full time education are due maintenance payments.

For more information about our Divorce Advice services, get in touch with Expert Wealth Management today by calling 01993 772467. You can also contact us online.

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