Wondering how splitting from your partner will affect your finances? We spoke to Tamsin Caine, Director of Financial Planning at Smart Divorce, to uncover the key issues.
No-fault divorce has made the process of separation a lot more amicable, but that doesn’t mean it’s any less traumatic — or less expensive. The no-fault divorce is a new concept that came into force in April this year under The Divorce, Dissolution and Separation Act 2020. It replaced the old ‘five grounds’ needed for divorce, aiming to remove the concept of fault and blame from the process. Although this act hopes to make future divorces easier for both parties involved, the financial side of divorce can often be the most difficult to navigate. Tamsin Caine, Director of Financial Planning at Smart Divorce, discusses what to be aware of.
How to divide your financial assets
“The starting point is 50:50, but that doesn’t necessarily mean this is the end point,” says Tamsin. “Most couples would begin by gathering together all their financial information, such as assets, liabilities, income and expenditure. Both parties would have a copy of the other’s financial information. It’s then a question of looking at the capital assets (savings, investments and properties) and pensions to see what looks like a fair split.”
Pensions can be one of the trickiest aspects, so the most important thing is to get professional advice so if you both want to keep your own pensions, you understand what that means and what you’re giving up, explains Tamsin. “The Cash Equivalent Transfer Value will not necessarily provide this information [and] you may need an actuarial report and/or a divorce specialist financial planner.”
Then there’s the mortgage to consider. “If the family home’s sold, the mortgage will be repaid and the couple start again separately,” said Tamsin. “If one person is buying the other out of the family home, they will apply for a new, often larger, mortgage to provide the funds to buy out the other.”
Tamsin explains there’s also an option known as a Mesher Order, which is issued by the court and states one parent will stay in the home while the other continues to own a share, with the property eventually being sold on a ‘defined event’ (such as a child leaving full-time education). “In this case, the mortgage usually remains in place as it was until the house is sold.”
Seek professional advice
Even if it seems like investing in professional advice is too expensive, it can be far more cost-effective than you think. An expert can save you time and guide you through the process and will often be able to see more clearly what the fair result looks like.
“While you can navigate the divorce process yourself, you might find some issue that wasn’t correctly and fully resolved in the past, comes back later,” says Tamsin. Ultimately, professionals work with clients who are experiencing relationship breakdowns all the time. According to Tamsin, “they know what to expect and in many cases what the answers to your questions are,” which can make the process far easier to navigate for all concerned.
Top nine tips to cut costs during divorce
Seeking professional advice will always be recommended when it comes to divorce, but are there ways you can cut the cost? Tamsin has these tips:
- Agree everything between yourselves, although it’s recommended you ask a lawyer to draft the financial consent order to ensure it’s done correctly.
- Use mediation, which can be cheaper if both parties are keen to reach a compromise.
- File for the divorce part yourselves online.
- If you have children, agree their arrangements between you.
- Keep your correspondence with your lawyers succinct and to the point, and the same with meetings and phone calls. Remember they charge an hourly rate.
- Use a therapist or divorce coach for emotional support, rather than your lawyer, who will be far more expensive.
- Consult a divorce team comprising different experts, so each professional can take care of a different aspect of the divorce.
- Take your time with the tasks, rather than rushing them just to send something in. It will take more time if questions need to be raised about the information you provide.
- Be transparent. If your ex’s lawyer has to ask questions because of non-disclosure, the cost of the lawyer’s time will add up.