When you divorce your financial attachments will still exist, so understanding what to do with your assets and debts will be paramount to making a fresh start. Here is how to separate your finances effectively and fairly.
What should you consider before divorcing?
If you are still working out whether or not you and your partner should divorce, then speaking to a mediator might either help you to solve your problems, or help you decide after all that you are better off apart.
Relate is the main organisation in the UK that can help you with this.
If you are in an abusive relationship and you want to get out, then you will need to take more immediate action, and could require somewhere safe to stay. In this case, you can go to the Refuge website, where you can get information on the signs to look out for, and what you need to do. There is also a national helpline on 0808 2000 247 you can call any time.
If you are in a same sex relationship, whether you are lesbian, gay, bisexual or transgender, then you can contact Broken Rainbow or call 0300 999 5428 or freephone number 0800 999 5428. These lines are not always manned though, so if you are in immediate danger, then you need to call 999.
If you simply want to talk to someone about your financial plans, or to get some support in relation to the welfare payments you might be able to receive, then you can speak to Citizens Advice.
When should you use a mediator?
If you have decided to divorce and are able to discuss things rationally with your partner, then you may not need a mediator to help you sort out everything that goes alongside splitting up.
However, if you cannot bear the sight of each other and will do nothing but argue when you see each other, then really you are going to need a referee. You could choose to speak with a mediator, which is likely to be less expensive than a solicitor.
Work out what your joint assets are
If you have decided that divorce really is your only option then you will need to start working out what assets you have.
When you go through a divorce, the court will determine how your assets are split. There is no definitive rule on how this is done, as each case is treated on an individual basis. It will not only be your joint financial accounts that will be reviewed by the court, but your individual accounts too.
To help you plan ahead, find out the value of any accounts, held by you, your partner if possible, and anything held jointly:
Savings accounts: Check your recent statements and update any saving passbooks you may have with your financial providers.
Investment portfolio: Contact your IFA for an update on your portfolio, or check your most recent documentation.
Property value: Find out how much your property is worth, our guide: How to get your home valued for free can help, and compare this with your remaining mortgage balance (if applicable) to work if you have any equity in the property.
Value of your debt: Find out what debt is held in credit cards, overdrafts, loans and any type of credit commitment.
Household income: How much do you spend to keep your home running? What is your disposable income?
Valuables: If you have expensive items, get them valued and record their prices.
Once you have tallied up the overall value of the above, you will have a good idea of how much your combined assets will come to, and how much will be reviewed through the courts.
Did you bring any individual assets into your marriage?
Any individual assets brought into your marriage will be treated on a case by case basis and at the discretion of the judge who will assess the needs of both parties involved. This process is called a financial settlement.
When you go through a financial settlement, you must declare all of your assets whether they are held jointly or solely. The courts will fine you if you try and hide any of your assets from your partner. Once the courts have assessed all of this information from both parties, they will then make a decision on how the assets are split, if at all.
What rights do you have on against your property?
Firstly, you need to work out how you bought your property:
Whether you brought the property as Joint Tenants or Tenants-In-Common will affect how much of the property you own and this will determine what you will each be entitled to when it comes to agreeing a settlement.
Joint tenants - Equally owned. If one of you passes away, the other acquires 100% of the property.
Tenants-In-Common - Owned 50/50. This means that you can leave your half of the property to your children, a family member etc, if you passed away, rather than it automatically going to the remaining mortgage holder. This type of arrangement can apply to you even if you are not married.
Who will get to keep the property?
If you have children together and you get custody of the children, you will usually be awarded the property by the courts as a family home.
However, the division can be a lot more complicated if the property is only in one spouse's name. While you may have been 'compensating' for not making mortgage payments directly, by for example paying the weekly grocery bill, you would need to be able to prove this is the case.
This can be difficult, as if the divorce is getting bitter, your spouse could easily claim that is not what the agreement was. So you are better off splitting your bills down the middle so there is no question that you are both paying for the property, in case you do end up splitting at a later date. This may be something to think of for future relationships.
The courts will assess your claims in any case, and make a judgement based on what it thinks is fair.
How much will a divorce cost you?
To file for a divorce you will need to pay a court fee of £410 before you begin. If you are on a low income or benefits then it is possible to get help with court fees.
Setting responsibility for joint debts
If your partner disappears and cannot be contacted by the lender, you will be the one who is left holding the debt, and you will be expected to repay it all, as you are joint signatory.
Ensure your lawyer gets some form of financial compensation for you from the divorce settlement should this happen to you.
If you have debts in both your names, then you are both responsible for them.
You cannot close accounts - whether it is a credit card, current account, personal loan or car loan, for example - until the debts have been repaid in full. However, you can ask the lender to freeze the account so no further borrowing can be accrued.
Any joint financial products that you have access to but are not using, for instance unused credit or store cards or current accounts taken out in joint names should be cancelled as soon as possible.
Let your creditors know you are going through a divorce as they will often be able to give you some leeway on dealing with your finances. But they are not obliged to, so do not expect it.
How are your assets split?
Just because you have assets in your own name, it does not mean that you will automatically keep them. The primary basis for splitting assets is to make sure any children are taken care of. Then the courts will look at the earning ability of both parties, and the financial responsibilities of both parties.
If you or your spouse received an inheritance while you were married, or even while you were going through the divorce but had not received the decree absolute, then anything you have received will still need to be taken into consideration when it comes to splitting your assets. This applies whether the inheritance was given to you or your spouse.
A solicitor or Relate counsellor may be able to help you sort out a financial deal before going to the court though, which can often work out better for both parties, and will save you both a lot of money.
Do you have a prenuptial agreement?
In the UK, prenuptial agreements are not legally binding at present, although there have been a number of cases where the judges have used the terms of the prenuptial agreement as a basis for splitting assets on divorce.
Even if they are not legally binding, they will set out your intentions, and if a judge is willing to uphold or at least take into account the terms of the agreement, it could prevent a lot of heartache, and expense.
What financial support can you find after separating?
You can use the calculators found on the following websites to find out where you stand in relation to government funding and benefits. The links below will be important to you if you have concerns over living on your current salary:
Take control of your current financial situation
Standing on your own two feet can be scary, but it is a lot simpler when you breakdown all of your expenses into segments. The trick is to find cheaper alternatives for each expense, and hopefully you will have more of a disposable income.
The Money Advice Service website can help you discover how much of your income is paid out on life's necessities like rent, bills, food, leisure activities etc.
If you are left with any remaining debt in your name only following your divorce, then there may be ways for you to reduce how much interest you pay. Use the links below to find a better deal on the following financial products:
Saving money on your financial accounts
If you are worried about getting the best interest rate greatest features then use the following links to offer you fresh financial options:
- Use our home insurance comparison table to find a cheaper policy for your property.
Financially disassociate yourself from your ex
You must no longer live at the same address, and all joint accounts, loans and credit cards must be settled and cancelled before you can apply.
You will want to make the break from your partner as clean as possible, and financially the best way to do this is to disassociate yourself from your spouse through the credit reference agencies.
The benefit of this is that nothing your ex does will then come back to haunt you, as you will be officially separated. Without doing this, then you could find your ex is claiming credit on the back of your good reputation, which is damaging for you.
Do not leave any stone unturned
Once your accounts are back in your name and you are completely disassociated with your ex, then it is important to alter the financial agreements that may not have jumped to the forefront of your mind while divorcing.
You may want to update your will if it still holds reference to your ex-partner.
If you are living alone, then you could be saving money simply by contacting your local council. A single occupant can save 25% on their council tax bill every year.