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The 'ex' files

Around 150,000 UK couples' marriages are set to end in divorce this year. But it is the financial, rather than emotional cost which can really take its toll at the end of a marriage.  The key to saving money is to keep the divorce as amicable as possible.  Getting your financial house in order should be a priority. Here are some steps to take:

Avoid unnecessary costs

It is no joke that the lawyers are the only ones to benefit from protracted divorce proceedings. If a parting is on amicable - or at leats civil - terms, then quite a bit of progress can usually be made before the legal system is invoked.   Do whatever you can to settle the hostilities and money issues as quickly as possible provided you are getting your fair share. If both partners are reasonable, seek counselling and consider arbitration rather than litigation to develop your financial agreement and divorce settlement. This is best for both sides.  If your partner wants to inflict financial pain, you may have no choice but to get defensive and act fast.

Gather Financial Documents

Dig out all financial and other important documents. Make a note of the account and policy numbers and telephone numbers for the financial companies they are held with. Look for the following:
  • Marriage Documents - such as prenuptial agreements and papers from any previous divorces and settlements.
  • Inheritance and estate planning - trusts, wills, power of attorney. Inherited wealth must be added to the pot of assets if a couple gets divorced, unless it has been placed in a specially underwritten trust.
  • Investing and Savings - current and savings accounts, share dealing accounts and certificates for stocks and shares, unit trusts, ISAs, bonds, investment trusts, premium bonds. Tax-free investments such as ISAs cannot be held jointly, but belong solely to the individual who took them out, even after separation. Courts will take this into consideration when distributing assets between them.
  • Work Documents - payslips, contracts, benefit statements, stock options, pension details, bonus information, health insurance, tax returns, disability insurance.
  • Debts - mortgage details, personal loans, HP and finance agreements, credit card bills. Most couples have to sell the family home and buy something smaller each. If one partner is looking after children under school age, the other may have to continue paying the mortgage on the family home, which may make it difficult to obtain their own mortgage. If you have a joint mortgage, both parties are responsible for the payments regardless of whether they stay together. If one party defaults, the lender will pursue both.
  • Insurance Policies - life, home, contents, health, car, long term care. Make a note of any cover you receive as a benefit from your partner's work or existing cover and find out how you stand in the event of a divorce. Some employers are strict about benefits only being made available to spouses. Think about the cover you would need if your income will be based in part or full on your partner's income and ability to earn a living. If you stay in the marital home, you will need single life cover in your own name.
  • Miscellaneous - car documents, antiques, gifts, jewellery.

Review bank accounts and credit cards

Building society accounts can be held in joint names and there is nothing to stop one party from cleaning out the account. If either partner suspects that this might happen, he or she can obtain a court order to freeze this asset. If salaries are paid directly into a joint account then this may need a fast change. But, as mentioned above, failing to keep up payments on a mortgage and other key debts could cause problems for both partners so direct debits may need changing to ensure that these are covered.  If one partner has credit cards where the spouse is a secondary card holder, then these may need reviewing too. Card issuers will pursue the primary cardholder for any debts run up by an unhappy spouse on the secondary card.

The pension position

At present, non-working wives cannot set up their own funds as they have no independent income and this leaves them dangerously exposed in later years. But the law changed in 2000 and now allows the courts to order the partner with the better pension provision, usually the male, to share that pension with their divorced spouse.  The fund is split by the court and the judge will look at the pension in the context of all assets. It will rarely be split straight down the middle. But it could mean that it will be a lot harder for one party to obtain ownership of the house, as before this has often been given up by the other spouse to compensate for the loss of pension.

Handling your finances after the divorce

Organise your paperwork again - make copies of your settlement papers. Make sure your lawyer has a copy and keep the other with relevant paperwork such as settlement agreements and property deeds.   Take control of your spending - many divorcees fall into debt because they do not adjust their lifestyle and spending habits. Write down a simple budget to assess your new income and outgoings. Start with a conservative approach to disposable income to avoid the debt trap.  Make a new will - and be sure to change your beneficiary designations and review related documents if your former spouse is a trustee or executor.

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