Divorce – how a specialist IFA can help you achieve a fair financial settlement
First published 07 January 2012 • Updated 19 July 2019
Unfortunately, a significant number of marriages end in divorce. Should this happen to you it is vital that, as well as speaking to your solicitor, you also obtain the advice of a Resolution accredited independent financial adviser (IFA). Article by Scott Gallacher.
A specialist divorce IFA will be able to assist you in completing certain paperwork (such as the financial review known as a form E) thereby speeding up the divorce process and reducing your legal fees. In addition, they can assess the valuations of both parties pension benefits and help you and your ex-spouse achieve a fair settlement of these valuable benefits.
How independent financial advice can help in divorce
The valuing of your pension benefits can be very complex, particularly in the case of final salary pension schemes.
In one case, the ex-spouse’s final salary pension scheme quoted a value of £194,000; however upon further investigation it was discovered that the scheme was underfunded – a fact that could have been easily overlooked as it was only mentioned very briefly in one of the trustee’s letters.
Taking into account the underfunding and allowing for the early retirement benefits available to the ex-spouse the fair value of the final salary benefits would have been £353,000 and had the spouse simply accepted the scheme’s own valuation this would have cost them £79,500.
IFAs can also advise and arrange life insurance in connection with maintenance orders to either protect your maintenance income in the event of the death of your ex-spouse or provide for your ex-spouse and your children in the event of your death.
They can help you move on with your new life by assessing your post-divorce income and expenditure situation (cash-flow and budget analysis), advising on a new mortgage and generally helping you rebuild your finances.
Taking financial advice in a collaborative divorce
A collaborative divorce is a way potentially to avoid the more confrontational aspects of a divorce. Instead of one spouse issuing proceedings and the other responding, the divorce is handled over a series of four-way meetings, including the two spouses and their lawyers. In a collaborative divorce, an IFA can work for both parties as the financial neutral. This role involves acting impartially providing information (as opposed to advice) to both parties and ensuring that they both fully understand all of the financial issues and your options. The idea is to help you both achieve a settlement you are happy with.
Seeking the advice of a specialist IFA as soon as you start the divorce process will help you achieve a fair settlement with the peace of mind that comes from knowing that the financial matters have been reviewed by your own independent specialist. This could avert years of regret and hopefully avoid, or at least reduce, any resentment between you and your ex-spouse that could be caused by either party feeling that they had ‘lost out’ financially.
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