Going through a divorce or separation is notoriously difficult. Here are our expert's tips as to how to make it easier.
Going through a divorce or separation is notoriously difficult. Untangling and making complex decisions about your finances is also time consuming and draining and can have significant and long-lasting consequences.
Anyone going through a breakup can therefore be forgiven for not wanting to prioritise their financial position alongside the myriad of other factors they have to consider. However, it is important to ensure that you make calm and controlled decisions and prioritise your financial and emotional wellbeing, as sometimes the reality of financial decisions do not become apparent until much later on. As the saying goes “to fail to prepare is to prepare to fail”.
Our experts can help guide you as to things that you should consider; here are their top tips to get you started:
1. Involve a financial planner or take advice early. If your finances are complicated, if you have significant assets or even if you can just afford to do so, then it is sensible to take financial advice at an early stage and before entering into any financial agreement with your spouse. A professional can help you to illustrate what your financial future may look like, provide guidance and take advantage of financial planning options.
2. Decide what to do with your family home. For many of us, the family home is the primary or only main asset. Options might include selling immediately, transferring to one or other party or keeping the house for a period of time before selling (especially if children are young). Think about your options and investigate the affordability of your preferred option – your emotional preference may not always make the most sense from a financial perspective.
3. Pensions or retirement accounts. Notoriously complicated, but after our homes, pensions or retirement accounts are often our biggest assets. Consider and research your options as to splitting, ring fencing or offsetting, which vary dependent on where you live and the type of account. Make sure you get an up-to-date valuation first and always seek professional advice.
4. Bank and savings accounts. In addition to your pension or retirement, you’ve probably got other savings, investments or accounts which could form part of the divorce settlement. Think about and agree upon what you are going to do with any of these assets. It is important to remember that the way you split your investments could have tax implications, dependant on location and type of investment, and there may be sensible financial planning that could save you both money so make sure you take expert advice where needed.
5. Create a budget. This should ideally be done before you finalise your financial agreement on divorce, but it is never too late to start! Speak to your financial advisor or ask our Apiary Experts for a precedent budget guide to give some thought to what you need for your financial needs moving forwards. Consider using an online budget tracking App or bank account.
6. Think about your income needs. Once you have a budget in place, think about how you are going to fund these needs going forwards. Do you have income through salary or do you intend to find work? Do you need financial support for yourself? How will any childcare or child maintenance costs be funded?
7. Cancel any joint accounts and set up new individual accounts. If you cannot close them immediately (perhaps because there is an outstanding liability or because household costs need to continue to be paid)then remove any overdraft and consider making the account joint signatories only, so either of you would need the other’s permission to make any transactions. Be sure to take legal advice prior to cancelling joint accounts if your divorce has not been finalised.
8. Change your beneficiaries. Make sure you update your beneficiary nominations for any pension (pension, retirement account, IRA,401(K)), life insurance or death in service policies to avoid a situation where your former partner was the one to benefit in the event of your death.
9. Have a rainy-day fund. If you can, try and put aside some reserves as an emergency fund, should you become unemployed, not receive planned maintenance or things otherwise do not turn out as you expect. Perhaps consider investing in a redundancy policy or disability / critical illness insurance.
10. Check your credit score. Checking your credit score not only shows you what you need to improve but, also, may remind you of joint accounts or policies that need to be cancelled or organisations you need to notify of your separation. Our ApiaryExperts have prepared a helpful checklist to guide you through this so please get in touch for details.
11. Transfer any joint assets. It is all very well agreeing what should happen to assets on divorce, or having an Order to that effect, but make sure you actually implement it! Speak to a lawyer about transferring any property into your name and make enquiries at the bank as to how to transfer any joint accounts.
12. Consider your tax position. Dependent on where you live, your new marital status may have an impact on how you file taxes or tax breaks you may be able to benefit from. Do your research and contact an expert if unsure. Our Apiary Experts can help connect you with the relevant individuals.
13. Find a new team. If you have historically relied on your former spouse’s team of experts(lawyers, financial advisors etc) then look at getting yourself a new team. Speak to trusted family and close friends about their recommendations or ask your Apiary Expert.
Anyone going through a breakup can therefore be forgiven for not wanting to prioritise their financial position alongside the myriad of other factors they have to consider. However, it is important to ensure that you make calm and controlled decisions and prioritise your financial and emotional wellbeing, as sometimes the reality of financial decisions do not become apparent until much later on. As the saying goes “to fail to prepare is to prepare to fail”.
Our experts can help guide you as to things that you should consider; here are their top tips to get you started:
1. Involve a financial planner or take advice early. If your finances are complicated, if you have significant assets or even if you can just afford to do so, then it is sensible to take financial advice at an early stage and before entering into any financial agreement with your spouse. A professional can help you to illustrate what your financial future may look like, provide guidance and take advantage of financial planning options.
2. Decide what to do with your family home. For many of us, the family home is the primary or only main asset. Options might include selling immediately, transferring to one or other party or keeping the house for a period of time before selling (especially if children are young). Think about your options and investigate the affordability of your preferred option – your emotional preference may not always make the most sense from a financial perspective.
3. Pensions or retirement accounts. Notoriously complicated, but after our homes, pensions or retirement accounts are often our biggest assets. Consider and research your options as to splitting, ring fencing or offsetting, which vary dependent on where you live and the type of account. Make sure you get an up-to-date valuation first and always seek professional advice.
4. Bank and savings accounts. In addition to your pension or retirement, you’ve probably got other savings, investments or accounts which could form part of the divorce settlement. Think about and agree upon what you are going to do with any of these assets. It is important to remember that the way you split your investments could have tax implications, dependant on location and type of investment, and there may be sensible financial planning that could save you both money so make sure you take expert advice where needed.
5. Create a budget. This should ideally be done before you finalise your financial agreement on divorce, but it is never too late to start! Speak to your financial advisor or ask our Apiary Experts for a precedent budget guide to give some thought to what you need for your financial needs moving forwards. Consider using an online budget tracking App or bank account.
6. Think about your income needs. Once you have a budget in place, think about how you are going to fund these needs going forwards. Do you have income through salary or do you intend to find work? Do you need financial support for yourself? How will any childcare or child maintenance costs be funded?
7. Cancel any joint accounts and set up new individual accounts. If you cannot close them immediately (perhaps because there is an outstanding liability or because household costs need to continue to be paid)then remove any overdraft and consider making the account joint signatories only, so either of you would need the other’s permission to make any transactions. Be sure to take legal advice prior to cancelling joint accounts if your divorce has not been finalised.
8. Change your beneficiaries. Make sure you update your beneficiary nominations for any pension (pension, retirement account, IRA,401(K)), life insurance or death in service policies to avoid a situation where your former partner was the one to benefit in the event of your death.
9. Have a rainy-day fund. If you can, try and put aside some reserves as an emergency fund, should you become unemployed, not receive planned maintenance or things otherwise do not turn out as you expect. Perhaps consider investing in a redundancy policy or disability / critical illness insurance.
10. Check your credit score. Checking your credit score not only shows you what you need to improve but, also, may remind you of joint accounts or policies that need to be cancelled or organisations you need to notify of your separation. Our ApiaryExperts have prepared a helpful checklist to guide you through this so please get in touch for details.
11. Transfer any joint assets. It is all very well agreeing what should happen to assets on divorce, or having an Order to that effect, but make sure you actually implement it! Speak to a lawyer about transferring any property into your name and make enquiries at the bank as to how to transfer any joint accounts.
12. Consider your tax position. Dependent on where you live, your new marital status may have an impact on how you file taxes or tax breaks you may be able to benefit from. Do your research and contact an expert if unsure. Our Apiary Experts can help connect you with the relevant individuals.
13. Find a new team. If you have historically relied on your former spouse’s team of experts(lawyers, financial advisors etc) then look at getting yourself a new team. Speak to trusted family and close friends about their recommendations or ask your Apiary Expert.
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