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

Feb 4, 2021

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

You’ve made the decision to divorce. Whilst financial planning may not be the top of your agenda, it should be – particularly for women. As family law specialists, we do much more than filing the divorce paperwork. 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. We’ve shared five areas where you can start planning to protect your finances today [tip: if you don’t have time to read the full post yet, skip to the summary at the bottom of the post].  

If you’re worried your spouse may withdraw money from a joint account, speak to our legal team today to discuss what action you can take. Book your free 15 minute advice call on 01274 727373 or WhatsApp Business 07999 363105.

Unequal Partners

In general, one spouse will earn more than the other. On average men earn 17.3% more than women (the gender pay).  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 your relationship as one of co-habitees (a non-marriage) which means you will have no entitlement to property, finances or pensions etc.

All of which leads people to say financial inequality is built into divorce. So here’s how you can start planning to protect your future financial position.

Make Sure You Have Legal Protection – Register Your Marriage

All too often, we work with women who find out that their nikah (Islamic religious marriage) provides them no legal rights. In the unfortunate event that your partner ends the relationship, or passes away, you may have no entitlement to any property, assets, pensions or money. Find out whether your nikah is legally recognised or read more in our religious marriages section.

Plan: make sure your marriage is legally recognised.

Avoid Surprises – Understand What You Have and Where

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: It’s important to understand what you and your partner have and where you have it (both individually and jointly). Any party seeking divorce should make a list of their bank accounts, ISAs, pensions and jewellery. Note whether each item is owned individually or jointly. Gather up 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. Plan your finance five.

Planning for Retirement – 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.

Home Ownership and Inheritance – Is It Time to Sever the Joint Tenancy?

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.

Draft 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.

Summary

Divorce happens but taking control of your finances is the start of your new life. You can begin planning today with our five areas:

  1. Legal Protection – register your religious marriage;
  2. Valuation: make a list of your assets and liabilities;
  3. Income: don’t forget to discuss pension pots;
  4. Property – you can decide to sever your joint tenancy and become tenants-in-common;
  5. Beneficiaries – draft or update your will;

SKB Law offers free 15 minute legal advice calls if you need further information regarding any of the issues you have read. We hope you’ve found this post helpful.

SKB Law is led by Sarah Khan-Bashir MBE – a solicitor with over 20 years experience. As a law firm, we aim to help more people access legal information. Our team supports clients across England & Wales with divorce, finances, children’s matters, wills and immigration. If we can help you, please reach out in confidence to our team on 01274 727373.  

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