I’m getting a divorce, how can I make sure I’m financially protected?

Overview

If you’re going through a divorce, you need to understand and protect your financial position. In this post, we cover your marriage, assets, debts, pension, home and will.  

Why You Need to Protect Yourself  

As family law specialists, we guide clients through the divorce process making sure they’re prepared and not caught out – all of which helps them to achieve a fair settlement. And whilst financial planning may not be the top of your agenda, it should be – particularly for women.

In general, one spouse will earn more than the other. On average men earn 17.3% more than women (the gender pay gap).  In our experience, two factors may increase financial inequality when it comes to divorce. Firstly, if one of you has taken time out to raise the children, it may lead to a gap in pension contributions and your state pension entitlement; more often the difference is felt more acutely by women. Secondly, if your religious marriage is not registered, the law may consider you co-habitees in a ‘non-marriage’, leaving you with no automatic legal entitlement to property, finances or pensions etc.

We’ve shared five ways you can protect yourself.

Register Your Marriage

We often work with women who learn their nikah is not legally valid. If your relationship ends or your partner passes away, you may have no automaticlegal entitlement to any property, assets, pensions or money.

Plan: check whether your nikah is legally recognised in the UK. Read our post about the nikah to learn more.

Make A List of What You Own and What You Owe

Only one in four divorced women have an accurate picture of their joint finances while in a relationship. A Forbes article shared the main surprises women encountered during their divorce process:

• Being unaware of the total size of their marital debt i.e. mortgage, car financing, credit cards, loans
• Not expecting they would have to return to the workforce
• Assuming child support would be higher or last longer
• Assuming they could keep the marital home
• Underestimating the cost of getting a divorce

Plan: Make a list of what you own (your assets) as a couple and as an individual – and where it is. This should include your home, bank accounts, investments, ISAs, pensions, jewellery etc. Make a list of what you owe (your debts) and how much you owe as a couple and as an individual. Collect any important papers such as bank statements, tax returns, credit card statements, retirement account balances, titles for any property owned, and any valuations for items such as jewellery. 

Don’t Forget Pensions

We know there can be a reluctance to discuss pensions as part of your divorce settlement. This point is particularly relevant for women. Research from AgeUK revealed that 40% of women aged 55-70 years are heavily dependent on their partner’s income for a decent retirement. The average man accumulates 5x the pension pot of the average woman and the average divorced woman has less than a third of the pension wealth of the average divorced man.  

Plan: currently, for divorcing couples who do not go to court there is no automatic right to know a spouse’s pension value at divorce. So try and have the conversation beforehand.  For an in-depth discussion, consider speaking to our team (request our Divorce Strategy Session) or retain a wealth manager as well as legal advice.

Protecting Your Home

Do you own a home with your partner? Some couples choose to sever their joint tenancy to protect their assets and prevent inheritance complications. You can choose to shift from a joint tenancy to being tenants in common so that your share of the property does not automatically go to your soon-to-be-ex spouse if something happens before divorce proceedings are completed.

You can sever the joint tenancy with or without the agreement of the other joint owner. It does not change who owns the property. It only changes the manner in which it is jointly owned.

• As joint tenants, you both owned the whole property and on the death of either of you, ownership of the whole property would have passed to the surviving spouse automatically.
• As tenants in common, you each own a distinct 50% share in the property. Your share of the property will not automatically pass to the other joint owner on your death (and vice versa).

You cannot be forced to sell the property unless ordered by court. All joint owners (whether you are joint tenants or tenants in common) must agree to the sale of the jointly owned property.

Plan: speak to a solicitor about whether you need to sever your joint tenancy.

Create or Update Your Will

Divorce can change everything. If you are divorcing and have property, children or significant assets, we recommend making or updating your will so that your named beneficiaries receive your assets. Without a will, your assets could pass to your soon-to-be-ex-spouse.

Plan: if you have assets, draft or update your will today. Find out more in our Start Your Own Will guide.

Thank you for reading. We hope you found this post helpful. If you’d like to learn more or find out your options, call our team.  Same day support available.

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