Looking after your finances in divorce is one of the major concerns divorcing spouses have. Concerns about pensions, property, debts, savings and investments can all emerge when you are splitting from your former spouse. We explain some useful facts and tips on how you can best look after your finances.
Financial settlements in the UK
When you get a divorce in the UK, you will also need to reach a financial settlement. This stage in the divorce process divides your finances, considers the ongoing financial needs of both spouses and concludes matters in a financial consent order. If you can agree on things between you, there is often no need for the courts to become involved. Be prepared to disclose complete details of your finances. If you try to hide finances, this will likely be detected and the court can penalise you, for example, they may order you to pay your spouse's legal fees.
Selling and transferring financial assets
Many divorcing spouses may consider selling or transferring their assets to another party in anticipation of a financial settlement not going in their favour. However, these are risky moves. If you have not agreed on things with your ex-spouse and you are going through the courts, they will likely view this as a means of hiding assets. This could lead to the court developing a dim view of your conduct in the rest of your divorce matters. Similarly, when it comes to spending your savings before a divorce, the courts may perceive this as a way of denying your ex-spouse their reasonable share and may lead to a penalty. In some cases, if your spouse is suspicious, they can apply for a freezing injunction from the court to stop you from handling your financial assets.
How do I protect my pension in a divorce?
Pensions will be considered in a financial settlement. This does not mean your pension will automatically be divided 50/50 but it will be taken into account alongside other marital assets.
● Offsetting your pension is a common approach. This means that you could, for example, keep your pension by exchanging it for other marital assets of the same value, for instance, property. Note that because a pension is not accessible until after retirement age, it is not always deemed as valuable as other assets. It's worthwhile speaking to a family law expert who will be able to tell you more on the value of your pension and further advice on matters such as how much of it was accrued before you got married.
● Another alternative is to acquire a pension sharing order from the courts. This allows the court to consider how much of your pension your former spouse is entitled to.
● In most cases, negotiating matters related to your pension is the best route. These discussions bring in other factors such as both parties' potential future earnings, their income, the length of the marriage, additional assets and the financial needs of any children.
Opening a trust account
Opening a Trust account or fund is an option many consider when faced with divorce. However, it's important to know that the courts can question elements of your Trust. If you are unable to provide satisfactory responses to those queries then negative conclusions may be drawn. If your Trust has been set up recently, ahead of your divorce then it could be called into question, in fact any Trust that does not allow for sufficient disclosure will lead to potential adverse assumptions that will not favour you.
Finances can become complex in divorce proceedings. Because marital assets vary greatly, every case is different. In all instances, if you are uncertain of what to do next, speak with a reputable family lawyer experienced in financial settlements.