What Are the Main Financial Considerations During a Divorce?

*This is a collaborative post on the main financial considerations during a divorce

Divorce is often an emotionally charged process for families, particularly surrounding children and finances. In this article, we’re going to discuss what the main financial considerations are during a divorce.

Divorce and finances can cause an array of issues for a couple coming to the end of their marriage. Asides from the raw emotions, it can be real headwork thinking of how your financial situation will be affected and how assets will be divided.

When you go through a divorce, your assets are split into two categories. This includes matrimonial assets, which are assets acquired during the marriage, such as property bought together, and non-matrimonial assets, which are those acquired before the marriage, such as pensions.

Non-matrimonial is often not used during a divorce financial division, but in some circumstances, it may be considered. To find out more about what the main financial considerations are during divorce, keep reading.

What Assets Could be Affected During Divorce?

When you divorce, all your assets could be impacted depending on your personal circumstances, but most often, the main financial considerations include:

Joint Property

Your property is likely the most significant and valuable asset you own and understandably is often the biggest concern of individuals during a divorce.

Whether you bought property together as a family home, or you personally own the property and perhaps another property for investment purposes, it’s likely that you don’t want your ex-spouse entitled to this. But in some cases, it’s not possible for property not to be involved.

Pensions

Other than property, our pensions are often one of our most precious assets and, during a divorce, are one of the main financial considerations. This is particularly due to their value and future importance.

How Can Finances Be Protected During Divorce?

It is understandably concerning that you may lose your hard-earned assets when you divorce your spouse. There are, however, things which you can do to protect yourself.

Hire a Solicitor

One of the best ways to protect yourself during divorce is by hiring a solicitor who has considerable divorce experience, particularly surrounding divorce financial settlements.

When you instruct a solicitor, they will take the time to understand your situation, your finances and your personal view on the matter. Doing this allows them to guide you towards the most cost-effective way to obtain a settlement, providing clear advice on your options and carefully explaining the benefits and limitations of each.

Prenuptial or Postnuptial Agreement

Before you are married or during your marriage, you can make a prenuptial or postnuptial agreement which can set out what will happen to your assets in the event of a divorce.

A prenup or postnup determines who owns which assets, any that are jointly owned and how these assets will be split during a divorce. Other aspects which can be considered as expected inheritances, trust funds and assets either party may wish to leave children from a prior marriage or relationship.

While prenups and postnups are not automatically legally binding agreements, if the agreement was correctly drafted and does not negatively impact any children, most courts will uphold the document.

Equifax has an informative article on whether a prenup will protect you during a divorce. See here to learn more.

Financial Settlement Agreement

Most people presume that the court is involved in the decision about how finances will be split following a divorce, but divorcees are entitled to make these decisions on their own accord.

When working with a solicitor, where it is appropriate to do so, they will push their clients into considering out-of-court approaches, best known as Alternative Dispute Resolution.

During family law matters, like divorce, private negotiation and mediation are commonly used to find an amicable outcome. These methods allow the involved parties to discuss their personal views and together make a decision that suits their needs and circumstances.

Financial Order

One significant aspect to keep in mind during separation is that divorce does not automatically financially split ex-spouses. Even if you and your spouse have made a divorce financial settlement agreement, this doesn’t prevent a claim from occurring in the future.

The only way you can cut ties with each other financially is through obtaining a financial order from the court. This means, however, you have decided to split your assets, so long as it’s fair and does not negatively impact any children, the court will provide a financial order, meaning you are no longer financially connected.

To learn more about this, see GOV.UK.

Pension Offsetting

As we mentioned above, pensions are often one of the main financial considerations during a divorce, leaving many people wanting to protect their assets from their ex-spouse. That’s where pension offsetting can become handy.

During pension offsetting, the value of the pension can be offset with another asset of similar value, such as the family home. What this means is that your ex-spouse will have the family home, and your pension will remain entirely yours.

There Are Ways to Protect Your Finances During a Divorce

What we can conclude from this article is that divorce can leave many individuals worried about what will happen to their assets. Whether separating couples split 50/50 or one spouse needs to provide the other with more, even with assets which were not earned or bought by them.

The main thing to take away from this article is that there are many ways to protect your assets, the most important being to hire a solicitor.

Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained legal or financial professional. Be sure to consult a lawyer/solicitor if you’re seeking advice on the law. We are not liable for risks or issues associated with using or acting upon the information on this site.