Dealing with divorce
Divorce can be stressful at the best of times, particularly when you are worried about potential costs. So if you're thinking about divorce as an option, it makes sense to get your finances organised as soon as possible.
Dealing with divorce in retirement
Your marriage may have lasted 20 or 30 years; you may be retired for just as long – and a divorce can have a huge effect on your plans for retirement.
What will happen to my assets?
Much depends on how you’re splitting up. Hopefully, it’s amicable. If you can agree how to divide your assets, then you’ll avoid a lot of expenses – divorce lawyers can be expensive. However, professional legal and financial advice can often be invaluable and worth the time and money invested. To give you an indication, you should budget approximately £3,000 for legal advice and court fees.
I’m divorcing, will I have to give up my home?
Your marital home is likely to form a major part of your mutual assets. It can be tricky to unlock the equity in it – and if you’re unable to do this amicably, the danger is that much of its value could be eaten by legal fees. If you do decide to sell it, it could help you both make a fresh start, but leaving your home is also an upheaval – both emotionally and financially.
If the mortgage is in joint names and one of you intends to buy the other out, you’ll need to make a new application to the mortgage company. Please be aware that the rules around mortgage affordability have become far stricter in recent years and the mortgage provider will want comprehensive evidence that either you or your partner can afford to take on the mortgage alone.
You’ll also need to discuss what happens in the interim and who pays the mortgage. It's essential that while you and your partner do decide, you continue to keep up the payments as any late or non-payments will affect both your credit scores.
Will divorce affect my pension?
It may do and it is now a legal requirement in the UK that pensions are taken into account as part of any divorce settlement. Pension funds can now be split between divorcing partners, and equalised. It’s quite complicated, so do speak to a professional financial adviser about ‘pension sharing orders’ and ‘pension earmarking’ as soon as you can.
Who else should I talk to, apart from a professional adviser?
Obviously, if you can talk to your partner and resolve things or agree an amicable way forward, that’s the better solution. If you find you’re thinking about a divorce, it may be an idea to involve your children if you can. If they’re over 18 then they’re unlikely to have a legal impact on how you divide your assets. But adult children will have an opinion, particularly if one of you has a new partner. And of course, it is a good idea to talk formally about your plans for revisiting trusts, wills, or arrangements to deal with Inheritance Tax.
What about if we have joint finances?
If you have any joint bank accounts, credit cards or loans, then you should get in contact with the relevant companies to explain your situation. Where you have deposit or savings accounts in joint names, you can stop your ex-partner withdrawing funds, or in the case of credit and loans, stop them running up any further debts in your joint names. Where you have direct debits being taken from any joint accounts to pay household bills, you will need to ensure these continue to be paid otherwise you could find that your services are cut off, or, as with mortgages, your credit histories are affected.
To protect you both, it is possible to freeze your accounts to give you both time to resolve any differences you may have over ownership of assets and, in the most extreme cases, you can apply for an injunction to stop your ex-partner from disposing of, or transferring and moving, any assets. In both examples, it's worth getting urgent professional financial and legal advice to ensure you are adequately protected.
So what’s the next step?
Gather as much information as you can about your assets and speak to the professionals who are best placed to give you formal advice. You may have to pay for this, but it will be well worth understanding your position (and your rights), in full. You won’t have to make decisions straight away, but your appointment will be confidential and will help you understand what could happen if your divorce does go ahead.
In the meantime, it's worthwhile taking a look at our specially-designed Retirement Budget Planner to help give you an idea of the sort of budget you should be looking at setting in your retirement.