Dealing with divorce: things to consider when arranging a financial settlement
After several years of decreasing divorce rates, 2010 statistics showed that divorce increased by 4.9% that year. Financial settlements are one of the major considerations of a divorce and we work closely with a number of solicitor firms who give advice in this area. When arranging a financial settlement, some of the issues that need to be considered include pensions, mortgage capacity, investments and insurances. The majority of solicitors have some understanding of these areas, but it’s limited, so it’s important to seek advice from an Independent Financial Adviser (IFA).
Since 1996, pension funds need to be taken into consideration in divorce, and it became possible to share them. Despite that, statistics show that only 8% of couples who divorced in the year ending September 2008 obtained Pension Sharing Orders (Source: 9/08 report by Ministry of Justice). It looks as though people are not taking advantage of this potentially valuable benefit. If you are going through a divorce, it is important that you seek professional advice and obtain a full understanding of your ex-partner’s pension.
This confirms somebody’s borrowing capacity and could be a consideration in a divorce settlement. If this applies to you, it’s very important to go to a mortgage broker like ourselves rather than to a single lender. The amount an individual can borrow does vary between lenders and by going to a single lender you will not know how their offer compares. A full understanding of the other person’s position is critical. It could be disastrous if a settlement figure is agreed and you fi nd out later there has been an error.
A full understanding of a person’s current investments is fundamental, because – as with pensions – there is more to investements than just a value. A full understanding of the terms and conditions is paramount.
As well as considering existing insurances, you also need to think about insurances going forward. For example, if maintenance is awarded, you need to know how this will be paid if the payee dies.
Divorce is a very emotional time and many people ‘need their hands holding’ through it. If you are considering divorce, it is essential that you seek professional advice, whether from Monetary Solutions or another IFA. There are two main reasons why you might find it beneficial to come to us:
- Because I don’t specialise in one particular area. Rather than you having to go to a number of different advisers, we can provide advice in all the areas above, calling in specialists should we need to
- Because I’m female. More women file for divorce than men, and we often find that, due to the nature of what they’re going through, they would prefer to speak to a woman about it. Being a female IFA is rare. Clients have told us they feel we have more empathy and that they can ask us ‘silly questions’ that they would find it difficult to ask a man.
We offer a free initial no-obligation consultation, so why not phone us on 020 8760 9940 and find out how we can help?