“My husband and I have been married for ten years, and we have two children, aged 7 and 5. We jointly own our home, but we have decided to get divorced. What are the financial implications of divorce?”
Going through a divorce can be difficult, and untangling your finances can seem very complicated. When you divorce, you and your husband will need to agree on how to separate your finances. I would recommend speaking to a financial planner before making any decisions.
One of the biggest decisions you will need to make is whether to stay in your home. You should make this decision based on what is best for you and your children. It might make more financial sense to sell the property and purchase something more affordable to reduce personal and financial stress. You may also need to consider the consequences that may affect your children. For example, you or your husband may be required to pay child support each month.
This may come as a surprise, but you will also need to think about what you want to do with your pension. Pensions are often amongst the most valuable assets that a couple has, so can play a hugely important part in a divorce financial settlement.
There are three main ways that pensions are dealt with on divorce:
Pension sharing orders: will divide up any pensions between the couple who are divorcing.
Pension offsetting: the value of the pension is offset against other assets during divorce. For example, if you hold a substantial pension, you may be able to keep it all while your husband retains the house.
Pension attachment/earmarking: when the pension is paid-out, part or all of the pension will go to the ex-spouse.
Your divorce lawyers may suggest that you use a Pensions on Divorce Expert in your settlement negotiations. This is a specially trained Financial Adviser or Actuary who can help with the valuation and separation of pension assets and make recommendations for a fair outcome.
Like with your pension, savings and investments are often included in a divorce settlement. However, dividing up your savings and investments is likely to be more straightforward. Please bear in mind that there are different tax consequences as well as charges to consider.
Any opinions expressed in this article are subject to change and are not advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested