Making the split pain-free
GETTING divorced will always be traumatic, despite new no-fault rules, but one of the most painful parts is sharing out the money and other marital assets.
Errors are easy to make, and costly. Here are the five major divorce mistakes, and how to avoid them.
HIDING ASSETS
As former Wimbledon champion Boris Becker discovered to his cost, concealing your wealth is risky.
Becker was jailed for two-and-ahalf years last month for hiding assets after his bankruptcy, which shows the danger, said Stuart Ruff, family law partner at south London and Kent law firm Thackray Williams.
While prison sentences are rare, if you are suspected of concealing assets you face months of questioning by divorce lawyers and the judge: “It could cost you thousands of pounds in legal fees.”
It is far easier to come clean at the outset. Ruff added: “You are unlikely to be original enough or clever enough to come up with something the courts haven’t seen before.”
USING BITCOIN
A growing number of divorcing couples are using Bitcoin to hide wealth from a partner, said Osbornes Law family lawyer Claire Andrews.
They can get caught out: “Under divorce disclosure rules, you must hand over bank statements which could highlight any crypto purchases, while your partner could request disclosure of smartphone app transactions.”
Bitcoin is volatile so its value must be reviewed throughout the divorce.
IGNORING PENSIONS
One in six divorced people do not realise that pensions form part of the settlement, according to Aviva research. This is a disaster for divorcees – mostly women – who were relying on their partner to finance their retirement.
Aviva head of savings and retirement Alistair McQueen said pension sharing, earmarking and offsetting against other assets are options: “Make sure you include pensions along with all your other assets, such as the family home.”
GETTING A TAX SHOCK
Take care when transferring or selling assets, or you could get hit by a shock capital gains tax bill, said Sarah Hollowell, director of tax and trustee services at Killik & Co.
While married couples can transfer assets such as property between each other free of tax, they may incur CGT on transfers that take place after the year of separation. If not handled properly, CGT can become an unexpected expense. Hollowell said: “Speak to an expert as soon as you start divorce proceedings.”
BEING TOO COSY
Everybody wants an amicable divorce, and new no-fault divorce rules should make that easier, but stand up for your rights too, said Emma Watkins, Scottish Widows’ managing director: “No matter how cordial the relationship, all assets must be reviewed. Seek support from a financial adviser as well as a solicitor.”