Five ways to manage your financial health after a divorce
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Knowing how to manage your finances after a divorce can be tricky – but luckily there's lots of advice available.
While figures from the Office for National Statistics reveal that divorce rates are at their lowest level since 1973, the separation rate among older couples is continuing to rise. So just how do you manage your finances after a divorce? Roy Durrant from Just Financial Planning shares his top tips to help you reach a financial agreement.
1 Know what you want
The first step to protecting your assets is, quite simply, to know what you want. 'This is something that needs careful consideration,' says Roy Durrant, a financial advisor at independent firm, Just Financial Planning.
'The best starting point is to get your bank statement and go through an expenditure schedule of all your normal outgoings. Then consider things that may be paid annually and any future capital expenditure items. Once you have calculated the monthly expenditure, add 10pc to this figure as a contingency. You then need to consider what income and capital you will have, post-separation, to meet your needs.'
Roy adds that most financial advisors will have a schedule to help you do this. 'And if you are worried your money may run out, consider going through a cash-flow analysis with your adviser.'
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2 Find advice
'Technically you don't need legal advice to get divorced,' says Roy. 'But to ensure you achieve a clean break and all assets of the divorce are fully assessed, I would recommend using a solicitor. I suggest talking to three solicitors to see who you feel comfortable with.'
You can generally find details about potential solicitors online, and the Citizens Advice Bureau can also provide useful information.
It's also worth booking an appointment with an independent financial advisor, who will be able to offer advice and guidance on how to look after your money.
3 Settle your home
Both parties will be involved in the settlement process, which usually involves a mediation session. So how is a divorce settlement calculated? The primary consideration will be based on needs, explains Roy: 'If one party has child care responsibilities then they may need a higher share of the matrimonial assets in order to house children of the marriage. But once these needs are met then normally, for a long marriage, the matrimonial assets are likely to be shared 50-50. The family courts have wide-ranging powers of discretion when resolving financial disputes.
'A matrimonial home may need to be sold so that each party can re-home themselves. If one party has a higher mortgage capacity, then this may affect the percentage of the share granted to the parties on divorce.'
4 Protect your accounts
Any existing bank accounts, credit cards, stocks and shares will also be taken into account throughout the separation process, which is why having a legal or financial advisor on hand to help is so useful. 'It is likely that one party will need to make a balancing payment to the other,' explains Roy – but care needs to be taken. 'If transfers of assets occur between a couple, post-separation, then Capital Gains Tax (CGT) could be due.'
5 Know your numbers
It's a common question – once you have agreed on a financial agreement and settled your marital dispute, how can you rebuild your finances after a divorce? A professionally prepared Consent Order will help to ensure a clean break and surplus income can be used to rebuild previous savings and pensions, says Roy.
'It is also important to get professional advice on how your existing savings and pensions are invested to ensure that they are working as hard as possible - but without more risk than you are prepared to take.'
For more information about how you can settle a financial dispute, contact Just Financial Planning on 01603 266333 or visit Just Financial Planning.