It’s a sad fact that more people choose to divorce in January than any other month. Many families will realise over Christmas due to the extra time they spend together that they are no longer the happy family they once were. Plus, many of us have a desire to change things for the better in the New Year, which is also likely to have an impact on people making such major changes to their lives.
There are various reasons that couples get divorced, but some of the most common include a lack of communication (35%), infidelity (22%), and financial difficulties (18%), according to data from Divorce-Online. While there are many things to consider when you are splitting from a partner, dealing with finances is one of the most important.
Most of us have some shared financial responsibilities with a spouse or civil partner, whether that is a jointly owned property, or joint bank accounts or credit cards. Splitting finances fairly is one of the most contentious areas of divorce, and the greater the animosity between couples, the harder and more expensive the split becomes.
Dealing with the split as calmly as possible
To avoid this, you should both do your best to remain as calm and amicable as possible while going through the divorce process. This has been helped by the arrival of the ‘no-fault divorce’ which came into force in England and Wales on April 6, 2022.
Prior to this, one spouse or civil partner would need to petition for divorce while blaming the other for unreasonable behaviour, adultery, or desertion. Removing this automatic blame game has meant many couples no longer face being trapped in a marriage because these conditions don’t apply, and prevents the starting point of a divorce from being combative.
Once the application for divorce is filed, there is a 20-week ‘cooling off’ period to ensure couples are serious about a split. If you still want to divorce after this time, then you apply to the court for a Conditional Order – which used to be called the Decree Nisi – and then six weeks later the court will issue a Final Order, which used to be called the Decree Absolute. Thanks to the no-fault divorce method employed now, there are very few ways that a divorce can be contested, a move designed to prevent domestic abusers locking their spouse into an unhappy marriage, which was possible before.
As the no-fault divorce has been deliberately designed to be less contentious, it should help couples split with less animosity. But you will still need to resolve who gets what in the divorce, which can be one of the trickiest conversations, especially when it comes to financial assets. But there are different ways to approach a split to ensure you achieve a clean financial separation.
Mark Keenan, CEO of divorce-online.co.uk, said: “A divorce is not truly final unless finances have been dealt with through a consent order, particularly a clean break. We encourage all couples to seek professional advice to ensure a fair and equitable division of assets, including property, pensions, and savings. Failing to do so can lead to long-term financial difficulties.”
What assets need to be considered in a divorce?
Dealing with the financial settlement of a divorce shouldn’t be an afterthought, and it is best to use professional advice from a solicitor, a financial adviser or an accountant to ensure a fair split. The most obvious assets to consider include any joint property purchases, such as the family home, money in joint accounts, and pensions. But you must also consider any joint debt such as mortgages, credit card debt, or personal loans that you may have in joint names. In addition, other assets that are in your own name only will need to be assessed as part of the split depending on what assets are available.
It might be tempting to save money by trying to resolve the financial settlement yourselves, but it could lead to an expensive legal battle if one partner feels they have lost out. So, getting professional advice to ensure any settlement you agree is valid is a sensible option.
Courts will typically look to split assets 50/50, but if one spouse – perhaps the person who has primary custody of any children – wants to continue living in the family home, then other assets will need to be offset against that value. This means any savings, investments, and pension assets may stay with the other spouse.
While keeping the family home may provide continuity for any children involved, you should consider whether selling the home and splitting the assets would be a better move as you cannot generate income from the property while you’re living there without borrowing more against it. As mortgage rates are higher than in recent years, and living alone can be more costly than living as a couple, you may need to generate additional cash from savings and investments.
If you decide to sell the property, you face other costs, such as early repayment fees if your mortgage is within a deal period. Plus buying another property will create legal fees and Stamp Duty costs. So, keeping the family home may be more sensible, but it will all depend on your individual circumstances.
One often forgotten asset is a pension, which can be a significant part of someone’s wealth, especially if you are divorcing later in life. This should always be considered as part of the divorce settlement. Men will typically have larger pensions than women, and it is vital that any pension involved in a financial settlement is properly valued, because once a court order is finalised, it can be hard to revisit.
What if I’m not married or in a civil partnership and split from my partner?
There is a common misconception that if you live together but have never got married or entered a civil partnership, that you have rights when you split up. But this isn’t the case. No matter how long you have lived together, you still have no right to split assets between you when you separate.
The term ‘common law partner’ is one of the reasons people believe they have more rights than they really do. But if you have children together, then you are both required to continue contributing financially towards them.
There have been suggestions for some time that common law partners should be given additional rights, but as yet these have not been brought into law.
Contact us
If you are going through a divorce or a split from your common law partner, then please get in touch with us and we will do whatever we can to help.