Divorce Financial Planning
Some people view their divorce solicitor as their ‘trusted advisor’, a mix of divorce and family law expert, unofficial financial planner and sounding board. However, when it comes to preparing for life after your divorce it can be really be helpful to speak to a financial planner, whether they are an accountant or financial advisor, or maybe you want to rely on a friend or family member.
With the news of the looming cost of living crisis, it has never been more important to plan and budget, and that applies to getting divorced and your financial planning. In this article our divorce solicitors delve a bit deeper into financial planning and divorce so you know what questions you should be asking your divorce solicitor and asking of yourself.
Online and London Family Law Solicitors
What is divorce financial planning?
Divorce financial planning covers a wide spectrum of financial organisation and panning. Anyone who is getting divorced will engage in financial planning, to some degree. Some people rely heavily on financial advice from professionals in the financial services industry, whilst others jot down some figures and hope for the best. The tech savvy person tends to prefer to rely on apps, spreadsheets and forecasts.
There is no right or wrong way to divorce financial plan, but you should not ignore the topic all together and simply hope for the best.
Examples of divorce financial planning include:
- Preparing a schedule of your current outgoings and anticipated future outgoings should you move from the family home and downsize.
- Getting valuation reports on assets such as the family home or a holiday home.
- Taking expert pension advice from a financial advisor specialising in pensions or from an actuary on the value of pensions, pension sharing order options and retirement plans after your divorce.
- Taking advice from a business consultant or accountant on how a family business will be impacted by a divorce. For example, if you need to raise a loan to make a lump sum payment because you are retaining the family business as part of the divorce financial settlement.
- Seeing a mortgage advisor to get advise on your mortgage capacity and to check if a mortgage company will take into account your spousal maintenance and child support payments or your spousal maintenance and child support receipts when assessing your mortgage capacity or whether your age will work against you when looking at the mortgage term available. If you want to stay in the family home, a mortgage advisor will be able to tell you if the mortgage company will agree to transfer the mortgage from joint names into your name. This is important because unless your husband or wife are released from their mortgage liabilities on the family home, they probably won't be able to get a mortgage to buy another property.
- Checking out the local property market to see if downsizing is a financial possibility after you have taken into account the costs of moving, such as stamp duty.
- Speaking to a tax advisor or your accountant about tax implications of a divorce and your financial planning. For example, if you need to sell a holiday home or a buy to let property portfolio to fund your divorce financial settlement you need to look at the net value of the assets, after payment of any capital gains tax. A tax advisor can help you work out the most tax efficient means of selling or sharing assets on divorce.
That may seem a long list but not all of those options may be necessary in your circumstances. Your divorce solicitor can help you identify the financial planning help you need and guide you on where to get professional advice on divorce financial planning to help you reach an informed and fair divorce financial settlement.
Family and friends and the excel spreadsheet
When you are getting divorced everyone seems to have an opinion about it, including how you should negotiate your financial settlement and what you should spend it on. It can sometimes be tough to remember that it is your divorce and your future and that it is up to you to make your financial decisions, supported by your divorce solicitor. However, supportive family and friends, are, and however detailed their excel spreadsheets, it doesn’t help you if their assistance means you get overwhelmed by facts and figures and end up not taking any action because you are so confused by all the information being thrown at you or by the strength of views of your family and friends about your future.
Divorce financial planning – boring but crucial
Divorce solicitors are sure financial planners and accountants would not agree that financial planning is boring. However, we should all agree that financial planning is crucial because without planning and reality checking you may end up with a divorce financial settlement that does not meet your needs.
For example, if the financial settlement deal is that you will get the family home, is it affordable because of the outgoings, not least the council tax and heating bills. If you need help with the bills, are you going to be entitled to claim spousal maintenance and, if so, for how long? If you stay in the family home, will you be able to afford to maintain the property or take your children on holiday? If you keep the family home and your spouse keeps the pensions, will you be able to sell the family home to fund your retirement or is the value of the pensions likely to far outstrip the pension income that you can raise from eventually selling the family home? These are all questions that need flagging up for consideration so that you have the opportunity to think through your financial settlement options and agree on the one that best meets your financial and other needs.
You may, for example, decide to keep the family home knowing that in the long run it does not give you the best financial outcome but you know that is what you want to achieve as your financial settlement. Alternatively, you may decide to keep the family business knowing that there is a risk that the business might struggle in challenging economic times but being willing to take that risk because of the extent of the potential rewards if your business plans come to fruition.
Working with a financial advisor can give you the confidence to reach a financial settlement because they can give an honest opinion on the ‘what ifs’ and the impact of inflation and the other ‘nasties’ on your divorce financial settlement.
Online and London Family Law Solicitors