Insights 06.4.22 Author: Ian Wells

Financial Planning During and After Divorce

Insights 06.04.2022 Author: Ian Wells

On 6th April 2022 the introduction of the Divorce, Dissolution and Separation Act 2020 will shift the landscape for uncoupling couples.

The key outcome is the “no blame” divorce. Rather than obtain evidence of “an irretrievable breakdown of the marriage”, courts are instructed to accept an application for divorce as conclusive.

Whilst the new Act simplifies legal proceedings, it does nothing to simplify the financial aspects.  The long-term monetary implications of divorce are difficult to determine. Financial decisions have a habit of resonating for a very long time.  Amid a deeply emotional and traumatic end to a relationship, making well rounded decisions about how to share the accumulated wealth of a family can be challenging without the correct support.

A couple’s most valuable capital assets are often their pensions and the family home.  Pensions can be particularly complex.  There are a number of options here and unless parties are close to retirement, pensions are a promise of a future benefit: “What will it be worth when I need it? Who controls it? Can it change in the future?”  During divorce proceedings, parties are expected to make decisions ‘in the now’ with repercussions, potentially, not realised for many years to come.

How do you compare £500,000 of pension to £500,000 of equity in a property? One party could live in the property and enjoy the feeling of security today.  However, they may not have sufficient time to build a pension of their own and become concerned about their long-term future.  The other may not be able to receive their pension for many years and will need a sufficient deposit for their own home, as well as income for a suitable mortgage. There are also different tax aspects that can affect the net value or benefit. How often, for example, are the potential Capital Gains Tax issues of selling a house after separation or divorce considered.

Financial planning at its best is a relationship offering stability and purpose during what can be the most challenging of times.  A good financial planner will have years of experience to help you determine the future impact of decisions made today.

A financial plan can’t mend a broken heart, but it can restore your hope for the future.

What next?

As always, the Financial Planning Team are on hand to discuss any thoughts or concerns that you may have, so please do not hesitate to contact us. In the first instance, please speak to Ian Wells.