Personal assets in divorce
Whatever your circumstances, a divorce will always involve dealing with finances. The financial aspects of any divorce should be one of your highest priorities, as it will affect your ability to continue your current lifestyle throughout the divorce process, and way beyond. LGFL Directors Rita Gupta and Anne Leiper explain more.
A divorce is a seismic event in terms of your finances and financial planning, if you’re not prepared for it. From the complexity of untangling joint accounts to suddenly discovering exactly what is held in which spouse’s name (or not), every aspect of a couple’s finances is put under the spotlight.
At the core of every divorce financial settlement is full disclosure of financial holdings, interests and assets. Without this, division and settlements cannot be fair to either party, let alone the children.
Sadly, for many spouses if a divorce is suddenly pushed upon them, they don’t have a holistic overview of their finances. Indeed, they may not even have control over much of their own finances. This in turn makes it harder for us to unearth and then prove who is entitled to what, and how the financial balance of the family works.
Be financially aware
You do need to be aware, financially speaking, of the matrimonial assets. You should build and maintain a financial status for yourself, and maintaining your independence is usually beneficial.
Few of use enter into a marriage without our own personal bank account and/or credit card, so we suggest that you keep it that way. Keep your accounts current, in the black, and separate from your spouse. Your divorce will involve fees and legal expenses, and you’ll need your own funds available to cover these at the very least.
Be informed
It’s inevitable that the longer you have been married, the more entwined your finances will become. It’s important that you have knowledge of every marital asset, whether owned by you, your spouse, or jointly.
The house is probably the asset most are concerned about, but often that’s just the tip of a financial iceberg. Your knowledge should extend to everything that has a monetary value, including, but not limited to:
- Pensions - state and private
- Investments including share funds
- Property and physical assets
- Savings accounts including ISAs
- Job-related company benefits such as a car, gym membership or medical insurance
- Share option schemes and bonus structures
Debts and liabilities
Also take careful note of all your outstanding debts and liabilities. These might include regular mortgage and credit cards repayments. You also need to consider ongoing debts that cannot be simply cancelled such as car repayments, HP deals, loans and school fees.
You’ll need proof of all of this on separation, so keep all original documents safe, and away from the reach of your spouse. For added security, scan all documents and store them in the cloud in an account your spouse cannot access. If the originals are lost or ‘misappropriated’, you can print these scans out instead.
“Soft loans”
With almost 50% of first time home buyers getting help from the Bank of Mum and Dad, so-called soft loans are increasingly common. These are informal family loans of money at little or zero rates of interest, that may no be repaid for years, if at all. Given the cost of property in our part of Berkshire alone, they can be quite substantial and potentially involve three generations – adult children, parents and both sets of grandparents.
Divorce courts do treat soft loans differently from formal loans from financial institutions, but they are still at heart an informal arrangement open to interpretation as a gift rather than a loan.
The best way to safeguard family money invested in a property is to formally register the loan at the Land Registry, just as the mortgage company will. This ensures a loan is recognised by any court in the future, and taken into consideration in any financial settlement. Equally, soft loan made from a family member should be evidenced in writing with clear terms on interest and repayment.
Be forward-thinking
Financial planning is crucial to ensure your ongoing financial stability. By thinking ahead, and planning your finances until all your children are over the age of 18, and then your own finances into your retirement, you can make sure any financial settlement is realistic in the long term. This may involve securing money in trusts for children and other dependents. Seek expert advice is what we would recommend.
Pre-nups as post-nup proof
A pre-nup is not just for Hollywood stars. It’s the perfect opportunity to define what each party brings to the marriage, from money in an account to personal assets such as shares, cars, and inherited items of value such as family jewellery or antiques. At LGFL, we can help you draw us a pre-nuptial agreement in sufficient detail to be taken into consideration by a court if required.
New spouse = new will
The other crucial document you need to draw up on getting married is a new will. Any will that pre-exists the marriage is null and void, and if you don’t make a new one, your estate will be divided under the rules of intestacy. So, please do ask us for help if needed.
Be prepared, information and future-proofed with our help and advice.
Call us for a free 30 minute consultation at our offices in Swallowfield, or new meeting spaces in Reading to discuss your unique situation.
LGFL Ltd - because divorce is about much more than just the law