Updated 03 September 2020
Divorce at any age is a traumatic event – but one that happens in later life may be even more so. Untangling the finances of a long-married couple can be a highly delicate process requiring expert advice – as Morven Millar of Gresham Wealth Management explains.
The good news is, married couples are staying together for longer. The Office of National Statistics (ONS) has found that, as the number of people getting married has declined in recent years, so too are divorce rates falling. It seems that those people who do choose marriage are now more able to make it last.
However, fewer divorces doesn’t make any individual divorce any less painful or complicated. And the older you are (or rather, the longer you have been married), the more complex the process can be. Long-married couples who divorce in their 60s or older may have around 4 decades of joint finances to unravel – and it can often be the proverbial can of worms.
A long marriage means many years of accumulated assets, including property, savings and pension pots. Furthermore, if one spouse has not worked, and has been relying on their spouse’s pension to support them in later life, the prospect of divorce may be particularly traumatic.
Most people are aware that a divorce requires the services of a solicitor. What many don’t appreciate is how important a financial adviser can also be in cases like this. Here are five ways in which an independent financial adviser (IFA) can help you through a later-life divorce.
Pensions are usually a significant asset in the calculation of divorce settlements. Furthermore, the issues surrounding them have become increasingly complex in recent years. It’s therefore vital that both parties aim for a fair settlement from these valuable assets.
It may seem that valuing pension benefits ought to be a fairly straightforward process, but this is often far from the case. It’s also outside the skill-set of your solicitor. So you will need to find an IFA who specialises in divorce settlements, to work alongside your solicitors to tackle the issue of how pension assets should be distributed between the two parties.
It’s often the case that one spouse tends to take more responsibility for overseeing the family finances. If this isn’t you, then you may find yourself at an immediate disadvantage. Not only does your soon-to-be-ex spouse have a better grasp of the finances than you do, but you may struggle to manage your own finances going forward. But it doesn’t have to be that way. An IFA can help you to establish a new financial plan of your own, including how to utilise any wealth that comes out of the marriage, whether you want to draw it as income or invest it for the future. Your adviser will also be able to reassess your changed needs now that you are no longer married, and work out how your tolerance to risk may have changed as a result. All this will result in a wholly new financial plan that is specifically tailored to you.
Divorce settlements often involve a lump sum. So if you get one, what should you do with it? Investment advice is essential if you want to ensure long term growth and replace any lost benefits. Depending on the age at which your divorce is finalised, you may be reliant on the lump sum to fund or part-fund your retirement, or you may need to use the funds for a property purchase. In any event, advice will be crucial in order for you to be able to maximise the value of the money you receive.
With interest rates currently so low, cash is no longer generating attractive returns. Therefore your adviser may need to help you look beyond cash to find a more suitable home for your lump sum in the medium to long term.
If the divorce results in you receiving maintenance income, then you’ll need to consider what may happen should your ex-spouse die before you do. Another way in which your IFA can help is to arrange life insurance in connection with any such maintenance order. This can protect your income in the event of your ex-spouse dying first – or, conversely, such insurance can provide for your ex-spouse and/or your children in the event of your death.
Generally, once a divorce settlement is finalised and agreed by a judge it cannot be revisited, other than in the most exceptional circumstances. Therefore it’s crucial that you are as satisfied as possible with the agreement that is reached between you. Help from an IFA throughout the process will give you this assurance that every reasonable avenue has been explored, and that nothing has been missed from a financial point of view. You will be able to confirm your agreement and walk away knowing that you have done everything properly.
If you are preparing to divorce in later life, help from a financial adviser as well as a solicitor can make all the difference.
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Morven Millar is a Chartered independent financial adviser with Gresham Wealth Management.