Article by Sarah Pennells
If you’re thinking about getting divorced, you’ll probably have braced yourself for a lot of uncertainty. But for many women, one of the biggest fears is about the financial consequences of breaking up.
When I was writing my book, ‘Divorce; how to help yourself and your finances’ , I spoke to many women who were either already divorced or in the process of splitting up. Most worried about how they would cope financially after the breakup and all wanted straight answers about how their home and other assets would be divided.
Unfortunately, there are few cast iron rules about who gets what (certainly if you get divorced in England or Wales, although it’s different in Scotland). But there are some guidelines that might help.
How are assets divided?
Big money divorces create all the headlines, but the reality for most couples is that they need to make the money that supported one household stretch to two. Only a small minority of divorces get as far as the courts, but lawyers always keep in mind what the courts would be likely to take into account when making recommendations and negotiating a settlement.
The starting point is to make sure that any children are provided for. Beyond that, the aim of the courts is to see that you and your ex husband have enough money for your needs. Only then will assets (such as money and property) that you’ve bought, built up or been given during your marriage be divided.
This doesn’t have to mean a carve-up of the house, pension and investments as there are different ways to reach the same goal, but it could mean one of you has to buy the other out or that the pension pot is dividedIn Scotland, the courts are only interested in money and property that you bought or built up while you were married (and until the date you separated). There are some exceptions; the main one being that a house or flat you bought before you got married and lived in afterwards will be included.
What the courts take into account.
When working out who should get what, the courts in England and Wales look at a range of factors, such as how long you’ve been married, how old you and your soon-to-be ex husband are, whether you’re both in good health and how much you’re each able to earn – both now and in the future.
In Scotland the list is somewhat shorter, but covers similar ground, such as whether one of you lost out financially (called suffering ‘economic disadvantage’ in the jargon) because you were married and/or brought up the children or – conversely – whether one of you gained financially at the expense of the other. The courts would also look at whether you were financially dependent on your husband while you were married or vice versa and would try and make sure that one party wasn’t left to foot the bill for the cost of bringing up your children.
Separating your finances
This isn’t the same as dividing what you own, rather it’s the practical steps you need to take to separate joint bank accounts and minimise the chances of being responsible for your ex’s debts. Unless your divorce is completely amicable, in which case you can sort things out between you, your best advice is to contact your bank sooner rather than later if you have joint accounts, loans or other debts.
The reason is that although it’s called a ‘joint’ account, you’re each responsible for the entire debt (no matter who ran it up in the first place). And sadly, many banks go for the easy option, which is to pursue the person they’ve got contact details for. If you stay in the family home while your ex moves on – and doesn’t want to pay his share – that will be you.
You may be better off closing your joint account and opening separate accounts in your own names. But, if there’s an overdraft, you probably won’t be able to do that until it’s been paid off.
Some banks will let one person freeze a joint account, but insist that both agree to unfreeze it, so if things turn acrimonious, your ex could freeze the bank account and refuse to agree to unfreeze it. Not all banks are as helpful as each other so check what your bank’s approach is. If your bank is making things worse, it’s definitely worth complaining.
Tips on preparing financially for your solo life
1. If divorce isn’t your idea, you may not have much time to prepare yourself for what’s to come, but if it’s something you instigate and your husband has been used to making all the financial decisions, try and spend some time getting up to speed on the money you have and the decisions that have already been taken.
2. It’s really tempting to ignore the warning signs that you’re heading for financial trouble, but try and face up to what’s going on. If it’s too much for you to deal with on your own, enlist the help of a friend or – better still – a debt counsellor from one of the debt advice charities (such as CCCS or National Debtline )
3. Keep an eye on your credit file. It may take a bit of a knock while you get divorced but you can add an explanation of why payments have been missed or delayed.
4. Separate joint accounts if you can. Find out how your bank deals with joint accounts held by couples who are breaking up.
5. In the UK we don’t have joint credit card agreements so, if you have two credit cards on the same account, one person will always be responsible for all the debt.