Jan 28, 2021 | KAREN RITCHIE
When we talk about supporting you with more than just your money, we’re talking about everything from helping you fund adventures, house moves and family legacies right through to dealing with the tough stuff – dealing with the loss of a loved one, living through a pandemic or going through a separation…
It’s important to understand your individual financial situation so that you have a solid base on which you can build your future. Quite often this get’s left until after the dust has settled.
Check out the things we think you should consider…
Get up to speed fast – Depending on how you’re approaching your divorce you’re going to see the family assets laid out in black and white. Don’t be passive in the process, try to understand and educate yourself on what the different assets are and how they work. A straight 50/50 split may not actually mean you each receive an equal share of the assets over time – this is particularly true when it comes to pensions.
What do you need to live on? – Most people know exactly what they earn each month but can’t explain where their money goes. Take the time to write down all of your expenses, and develop a realistic monthly budget and think about how this is likely to change over time
Who will keep the family home? – It’s often a very emotional decision whether to keep the family home, especially when children are involved. While it would be nice to remain where you’re comfortable and avoid the hassles of moving, staying put might not be the best financial decision. No matter how attached you are to your home, it’s critical to have a realistic sense of whether you can afford it. No point in giving up everything else in order to keep your home only to find that you have to sell a few years down the line as you don’t have enough income.
Moving on – If you need to find a new home – what will it cost? Do you want to stay in a particular area for friends/ family/ children’s schooling? What is the cost of the type of house you’d be looking for in that area?
Pensions and retirement – Emotions around pensions can run very high – but remember in England any pension (regardless of when it was accumulated) is deemed a marital asset.
Pensions offer a form of income in retirement that is hard to replicate. This is particularly true of Final Salary or Defined Benefit pension schemes which offer a secure, inflation linked form of income. If you simply view a Final Salary pension as a capital value it may not provide a true reflection of its worth.
Don’t agree a settlement blind – Don’t agree a settlement unless you have actually tested what it means to you. Look at what you need and what you are being offered – ideally find a wealth manager that understands divorce proceedings and get them to run a lifetime cashflow for you. Ask these types of questions:
– Can I afford to do everything I would like to do in the future?
– How long will I need to keep working?
– What investment return do I need to achieve to do all that I want to?
– Will I need to draw on my pensions and if so when?
Ensure your income will continue – If you’re receiving maintenance make sure there is life insurance on your soon-to-be-ex spouse. You should own the life insurance and be in control of paying the premiums.
Consider both parties – This can seem impossible in the midst of the emotions of a divorce. But it’s important to remember that making the best financial decisions for both parties will benefit the family overall in the long run.
Try not to take advice from friends, family or neighbours – Even if they have been through a divorce themselves, they’re not experts and they probably won’t be objective. Rely on them for support rather than advice.
A couple of extras that often get forgotten – Don’t forget that you may be able to claim a 25% discount on your Council Tax if you are the only adult living in the property – check with your local council to see if you are eligible and, if appropriate, to see if it can be backdated.
State pension – it’s no longer possible to benefit from an ex-spouse’s higher national insurance record to claim a higher state pension but you can contact DWP to see if you would benefit from making additional national insurance contributions yourself.
If you or a loved one are going through a separation and you would like some support assessing your finances, get in touch with your usual CPW team member or book a no obligation call by clicking here.