The importance of financial advice when you’re going through a divorce

Making the decision to end a marriage can be a life-changing one. This is why it isn’t a surprise that, at such an emotionally difficult time, many people don’t consider the financial implications that it can have.

These issues can cause serious financial hardship in the years that follow if you don’t handle them carefully. This is where seeking professional advice can help you, as it enables you to make informed decisions if you’re separating from your partner.

If you’re in the process of seeking a divorce, or are considering doing so, working with a planner can help you to properly understand the financial implications of your choices. Read on to find out how they can help you.

Working with a planner can help you to split assets in a fair and equitable way

Typically, one of the most important aims of a divorce settlement is to split your collective assets in a fair and equitable way. This helps to ensure that you can each carry on with your lives with no lingering resentment or difficulties.

Often, one of the most important assets that a couple own are their pensions. These can be as valuable as the family home, if not more so, which is why it’s important that you can make an informed decision when dividing them.

The process of valuing your pension assets isn’t always as straightforward as you might think, however. While you can request the “cash equivalent transfer value” from your pension provider, it may not be entirely accurate if you have a defined benefit scheme.

This is where working with a financial planner can help you. They can assess the true value of your pension assets, which can make the process of dividing them much simpler.

Working with a financial planner can also be especially helpful if you and your ex-spouse opt for a pension sharing arrangement. This can often be a useful way to have a clean break, as it splits the value of your pension assets and transfers the credit into another scheme.

Here, a planner can facilitate the transfer and provide helpful advice as to how the pension credit should be invested. Often, your investments need to be reassessed after a divorce, as your progress towards your financial goals may have changed.

Alternatively, if the court makes a lump sum order, in which one party has to pay a fixed amount of money to the other, a planner can help to advise on how the recipient should use it.

Seeking advice can be useful when reorganising your financial protection

Just as many couples organise their pensions and investments together, you may likewise have a joint protection policy in place, such as life insurance.

If so, divorce can pose some potential issues, but working with a planner can help you to overcome them.

Typically, unless you have a “separation benefit”, you probably won’t be able to simply divide your joint insurance policy with your ex-partner. If this is the case, you’ll have to choose between one of you taking on the arrangement as a single policy or cancelling it altogether to organise another.

If you want to take over the policy, there are a few things that you’ll have to bear in mind. For example, you’ll now be responsible for paying the full insurance premiums and will have to add those to your monthly expenses. You may also need to decide who will benefit from the payout.

Working with a financial planner at this stage can help to make the process of changing the policy much smoother, giving you one less thing to worry about. They can also provide invaluable advice if you and your ex-spouse would prefer to discard your joint policy and organise new ones.

A planner can help you to decide what to do with the family home

One of the most important ways that working with a planner can help you is when it comes to deciding what to do with the family home. This is often one of the biggest decisions for people going through a divorce, especially if you have children.

If you and your ex-partner have a joint mortgage, one of you may want to take over this in order to remain in your home. Of course, whether or not this is possible will depend on your financial circumstances.

A financial planner can take an objective look at yours and your ex-spouse’s finances to determine whether either of you can afford to buy out the other, while keeping up with the monthly mortgage payments.

If you can’t afford to take over the mortgage, they can also provide useful advice on other options, such as switching to an interest-only mortgage or taking out a “guarantor mortgage”. Both types can have advantages and disadvantages, so it can be essential to seek professional advice.

Alternatively, you could even consider selling the home and repaying the mortgage with the proceeds. This would, of course, allow both you and your ex-spouse to move on and buy your own individual properties.

If you decide to choose this option, a financial planner can help to make this change as smooth and hassle-free as possible, giving you much greater peace of mind.

Ensuring you have enough to live independently

Perhaps most importantly of all, a financial planner can ensure that you’re going to have enough money to achieve your future financial goals independently.

Now that you’re no longer with your ex-partner, you need to know that your money will still be able to provide you with the lifestyle you want.

A planner can add immense value to you here. They can work this out mathematically, taking all your incomings and expenditures into account.

They can use cashflow modelling software to give you an accurate picture of how much you have and how much you’ll need to achieve your desired lifestyle.

They’ll then make personalised recommendations and show you how implementing different strategies can affect those figures, ensuring you’re able to live the kind of life you want.

This process is crucial for giving you the confidence and peace of mind that you’ll be financially stable and secure for the future.

Get in touch

If you’re going through a divorce, you may need financial advice now more than ever. If you want to find out more about how we can help you, get in touch. Email enquiries@rosebridgeltd.com or call 01204 300010 to find out more about how we could help you.

Please note:

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.