So Brangelina are to divorce – What happens to the money?

It’s all over the media – press, radio, TV, Facebook & Twitter - Brad Pitt and Angelina Jolie are to divorce! The questions many are asking are “who cheated?” and “with whom?” but more practical considerations arise. 

When there’s a split, how do you disentangle your financial and lifestyle plans from those of your partner?

Sometimes life serves you lemons …

The typical Jones Hill client may not have the finances and lifestyle of Brad & Angelina (possibly a rash assumption on our part!), but they’d be wise to involve a financial adviser in the separation negotiations. In the absence of a pre-nuptial agreement (Apparently Brad & Angelina didn’t have one, so you’re in good company!) you would be foolhardy not to take specialist advice before agreeing on the terms of a split. 

It’s true that a financial adviser will add to the costs of the separation, but the arguments for consulting a financial adviser regarding a divorce are similar to the arguments for consulting one at all – please also see our blog post “Are financial advisers worth it?”

In a separation there may be investments, pensions, property (eg a family home, holiday home) and financial liabilities (eg a mortgage) to be split. Pensions can be split on value (for younger clients) or on income (for more mature clients).  It may be prudent to balance a pension against other assets to avoid having to cash-in and start afresh (offsetting) or it may be possible to have a portion of a pension paid to another party (earmarking) rather than start new separate pensions (splitting).

Market conditions or other reasons may make it undesirable to sell property, and in that case, a balance will have to be achieved using other assets. The division of mortgage liabilities will likewise need careful consideration according to the age, employment situation and other liabilities of the parties.

The tax efficiency of any financial arrangements should not be overlooked. Whilst gifts between married couples or civil partners are tax-free, the transfer of assets may give rise to Capital Gains Tax liabilities, and the post-split tax situation of the parties may be very different from each other.

Whether you’re married, in a civil partnership or co-habiting, if separation is on the cards, don’t forget to contact your financial adviser as well as your divorce lawyer.

PS – Brad/Angelina – remember, if you’re calling Jones Hill from outside the UK, add +44 in front of our telephone number!

OK Brad, we can understand that if Angelina has just announced she’s divorcing you, then making lemonade won’t be high on your list of priorities.