Ten steps to reduce the pain of divorce January sees a surge in divorce inquiries, says TRICIA PHILLIPS
SADLY, despite divorce rates dipping from their peak in 1993, more than two in five marriages still break down, after an average of 12 years. It’s a stressful and emotional time going through the breakdown of a marriage and couples can easily rush into things, end up with a poor financial deal and pay huge sums to lawyers.
Sarah Coles, personal finance analyst at investment firm Hargreaves Lansdown, says: “A festive combination of alcohol, money pressures and spending time together can be the final straw when your marriage is in trouble – especially when you have been hanging on because you didn’t want to ruin Christmas for the kids.
“So, unsurprisingly, once everyone is back to work and school, divorce lawyers can expect the phones to start ringing.”
Divorce is usually horribly expensive, but you don’t have to stay in an unhappy relationship because you’re afraid of the costs you might incur.
If you know the financial risks, and take steps to avoid them, doing so can help keep costs to a minimum.
Here, Sarah shares her 10 tips on common financial mistakes – and how to avoid them:
GOING STRAIGHT TO COURT
IF YOU can agree everything between you, a solicitor can draw up the documents for £500-£1,000, plus court fees of around £500.
If you fall out and start swapping solicitors’ letters you’ll easily run up £4,000 to £5,000 of costs. If you go through the entire court process, you can spend £10,000 – and plenty of people end up spending more than double that.
EXPECTING TOO MUCH
EXPECT too much and you won’t be willing to accept a compromise, so you’re more likely to end up in court.
Of course, once you get to court, the final decision will be up to a judge, who may disagree with your idea of what’s fair, and give you far less than you were offered when you started.
DIY DIVORCE WITHOUT GUIDANCE
IF YOU don’t own very much between you, there are no children, and you are on good terms, doing it yourself can save a fortune. You can draw up the forms, or get a low-cost legal service to do it for under £100 (plus about £500 in court fees).
However, you won’t get any advice, so if there are pensions, a property, significant savings and investments or children to consider, there’s a real risk of making an expensive mistake.
FIXATING ON KEEPING THE HOUSE
IT CAN be hard to face the idea of downsizing or moving somewhere cheaper, but you need to be confident you can afford the mortgage, bills and maintenance.
Don’t forget, you’ll also have to rebuild things like pensions and savings that you may have to give up in order to keep your home.
NEGLECTING THE PENSION
WHEN your spouse has been building up a pension for years, it could be worth as much as your family home, so don’t give up a share of it lightly.
It’s not always easy to tell what a pension is worth, but you should get a pension valuation as part of the financial disclosure, so if you don’t have one, ask for it.
If your partner has a big pension, it may be worth paying a financial adviser or accountant to check the numbers.
SPLITING PENSIONS WITHOUT HELP
THERE are three ways to split it: one person can keep it and trade it Split decisions: against other things you both hold; you can split the pension pot into two today; or you can agree to share it when it’s being paid out.
The right answer depends on your circumstances.
If, for example, you’re much younger than your partner and choose to split the income, payments may stop when they die – leaving you pensionless.
It can all get a bit complicated, so if one of you has a decent pension, it may be worth paying for advice.
TRYING TO HIDE THINGS
IF YOU don’t give your solicitor the full picture, you’ll waste a lot of time and money. If you lie to your ex about assets, you risk ending back in the divorce court – even after the deal is finalised – going through the whole expensive process again.
FAILING TO CUT TIES
DURING the process, any joint financial products will be frozen, and when you come to an agreement they will be closed. However, you may still need to cut ties on your credit record – to stop your ex from influencing your ability to borrow.
You’ll need to contact Equifax. co.uk, Experian.co.uk and Transunion.co.uk (formerly Callcredit) and complete a notice of dissociation.
NOT FINALISING THINGS
IT’S WORTH paying for an additional consent order, which stops either of you coming back for more after the marriage ends. In 2010 a lottery winner ended up giving his ex-wife millions of pounds from his win, despite the fact they had split up 10 years earlier. A consent order protects you both from this sort of claim.
RELAXING WHEN IT’S OVER
If you lie about your assets you risk ending up back in court doing the whole expensive thing again...
YOU need to start rebuilding as soon as you can – including paying into an emergency savings safety net and restoring your pension. Don’t forget insurance too.
If you’re relying on maintenance payments, you need to insure the life of the person paying them to protect your family.
Acting rashly when a marriage breaks down can leave you in financial difficulty