Table of Contents
Divorce is always turbulent, even no-fault divorces. To compound matters tough economic times may make a bad situation worse. If you are about to separate or divorce or are considering it, choices made now will have a significant impact upon your financial future.
Here are our tips to help you cope:
Try to agree as much as you can.
The last thing you want is a long Court battle which is likely to cost tens of thousands of pounds. If your divorce drags on, costs will mount. The key is to compromise. Sometimes you will have to give up ground, to gain ground.
Get your timing right.
If at all possible, don’t separate just before the end of a tax year, as you will have little time in which to consider the most tax-efficient arrangements. For example, you may incur a bill for capital gains tax at a time when your finances are particularly vulnerable. In the eyes of HM Revenue & Customs, transfers of assets such as property and company shares result in no immediate capital gains tax liability, as long as they take place in the tax year during which you separate.
Make interim arrangements for bills.
Even if you agree to a joint divorce, it will be months before a final settlement. Do not ignore debts and decisions about who will pay them.
Update your domestic budget, if you have one. If you do not, make one.
Be realistic and recognise where costs of living have increased.
Put in the time to research what outgoings are genuinely costing you as opposed to inserting your best guess or what you have been used to paying. Those estimates might now be out of date.
If necessary, talk to your mortgage provider to see if they can assist in delayed or reduced payments until the house is sold.
Save, don’t spend.
Don’t begin spending money wildly as a form of “payback”, or because you want to keep it for yourself. The court has power to add back wasted monies, so you may be left worse off in the long run.
Recognise where you are being tempted to spend extravagantly whether on individual purchases – a new car, motorbike, an expensive holiday – or day to day expenditure. Try to stick to a budget.
Keep valuing assets.
Keep valuing assets until the case is sorted, especially if it’s taking time. Know the full value of what you are settling for, particularly pensions.
Cash is king.
Cash is king in a recession, but remember, other assets can go up and down in value.
