Advice is right – joint assets
Flora Maudsley-Barton tackles the difficult scenario of a couple who are considering divorce and gives her top financial tips to help keep things amicable when it comes to those joint assets.
1. What are the three most important things that couples should consider when they get divorced?
Be realistic about the property market, ask your estate agent “What do you think will happen?” Here’s why it matters: A keen estate agent sets an optimistic price, ‘Bob and Sue’ carve up the money based on that price. The house doesn’t shift. ‘Bob and Sue’ can’t reduce the price because they based their negotiations on it. The divorce drags on and nobody can put the divorce behind them.
People end up worse off after their divorce. It’s simple maths. Whatever you are worth before the divorce will be divided (perhaps not 50/50) between you, minus the cost of the divorce. Agree on as much as you can between you to save fees. To put it bluntly, if you fight over the dog, the lawyer gets the dog.
It is really important to stay amicable. Get some relationship counselling, so you might not get back together, but it is still worth doing if it helps you to part amicably.
2. What’s the best piece of financial advice you would give to a couple who are looking to get divorced?
Remember to count your pensions, especially if you have no pension of your own, especially if you’ve been married quite a while, especially if there’s a big difference in your earnings. It’s easy to concentrate on the kids/dog/house/White Album on vinyl.
It’s tempting to make deals like “you keep your pension and give me the house”. The pension is less obvious and less immediate. The pension may well be worth more than the house and will be needed in later life. Sharing a big pension makes a more fair division.
3. What is the most common question you get asked by someone who has recently divorced?
The most common question is …
Q: “What’s a pension sharing order and what do I do with it?”
A: “To put it simply, it’s a court order to your ex’s private pension, telling them to give you £xx from your ex’s pension. This is now your money, and your ex will no longer have anything to do with it.”
4. What is the most common financial mistake you find couples make when they get divorced?
It is heartbreaking to see financial settlements fall apart when the payer can’t pay – eg he’s lost his job – or much worse. The easiest solution is to get insurance planned early so you can adjust the financial settlement to make allowances for it. Think about insuring maintenance payments until retirement – against death or ill-health.