How to Steady the Ship After your Divorce

Ending a marriage comes with a large handful of challenges, with money usually topping the list.

As a divorcing woman, you may feel overwhelmed because you spent your married years letting your spouse handle your financial picture. It’s time to take the bull by the horns and set yourself up for success by following these tried and true steps.

1. Update your accounts

The first step in steadying the ship is to take back control over your accounts.

If you have changed your name, you will need to update your bank and investment accounts. Identification cards, passports, and other property in your name will also need to be updated as soon as possible.

It’s not exciting, it is boring, but it’s a necessary step toward protecting what is rightfully yours while getting yourself organised for your new life.

2. Create your own goals

Throughout your marriage, you probably had a number of financial goals you were working toward with the help of your spouse - paying off the mortgage, university fees and so on.

You now need to create your own goals, remember it probably wasn’t raining when Noah built the ark!

Getting ready for retirement, paying down mortgages or loans or funding an account for travel all look a little different when you’re on your own.

Knowing what you want is the best place to start.

3. Have a plan in place

After you’ve determined what you’d like to achieve, you need to work out how you’re going to achieve it...

Your new financial plan should answer questions like:

  -  When do I want to reach these goals?

  -  How could I use my current and future assets to help me get what I want out of life?

  -  What does success look like within this new plan?

Getting clear about the path you will pave to secure the things you want in your financial life is a powerful step toward securing a stable future. For help with creating an actionable financial plan, check out our guide here.

4. Focus on what you can control

Emotions run high during and after a divorce, and they have a tendency to get in the way of reaching your new found freedom.

To steer clear of emotional pitfalls, focus on taking control where you are able. These areas may include paying yourself first through automated savings plans and investing with a long-term perspective in mind.

In addition to taking charge of your savings and investments, understanding the difference between what’s coming in the door (income) and what’s going out (expenses) each month is necessary for maintaining a tight grip on your plan. Know your budget inside and out, and make it work in line with your overall goals – without getting caught up in the things you can’t control.

5. Get help

Finding financial stability after divorce doesn’t mean you have to go it alone. At Jones Hill, we understand the financial complexities that come with ending a marriage and work to help you  move forward in the best way possible.

We lend an expert hand in building a new financial plan that fits your updated needs and goals. 

To schedule your consultation and get started down your post-divorce financial path, contact us today.

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.

A Woman’s Guide to Pension Sharing in Divorce

If you’re a woman, you’re statistically more likely to experience financial and emotional hardship throughout the process of divorce, especially if you are on the brink of retirement. One of the main challenges you may face at the moment is trying to pick your way through pension sharing, knowing that if it goes wrong you could be left short of money in later years.

What is Pension Sharing?

Pension sharing is the process of splitting pension schemes built up during working years. Any one of your ex-partner's personal or work-related pensions can be shared based on a percentage dictated by the financial settlement agreed during the divorce process. Pension sharing effectively awards a partner with a transferable credit for sticking it out in the relationship, creating a way to use funds that would have been available to both parties should the marriage have remained intact.

Considerations for Divorcing Women

If you are considering a pension sharing order, special care should be given to certain aspects of the process. First, pension sharing is based on a percentage of your partner’s pension valuation – not a hard and fast amount. This creates complexity due to the length of time that passes between agreement on that percentage and when the transfer credit takes place. Pension values fluctuate over time, especially when underlying investments are relatively high-risk. If markets take a turn for the worse, you may be left with far less than anticipated.

As an example, let’s say Mary is set to receive 50 per cent of Tom’s personal pension, currently valued at £250,000. Four months pass between the time a pension sharing order is granted and when the transfer credit is implemented, and Tom’s pension valuation has dropped to £170,000. Instead of receiving half the initial valuation, Mary is left with half of the current pension value - a difference of £40,000!

Managing the Time Risk

Remedies that lessen the blow of the moving target of pension valuation are scarce, but you can work quickly when pension sharing orders are in play to ease concerns. Overarching rules provide that pension sharing orders are required to be completed within four months, and pension providers must act swiftly to deliver the transfer credit. Also, asking for a pension valuation near the start of the implementation process is a sound strategy to safeguard yourself from drastically lower valuations.

Additionally, knowing where the pension credit is to be transferred well before the transfer credit is implemented is a critical step. It is rare that you are eligible to take ownership of a transfer credit under the same work or personal pension scheme already in place by your partner. Instead, transfer credits are applied to pensions in your name. If you do not have a pension prior to a pension sharing order being granted, you should work with a professional to create one.

Speed and planning ahead are not the only means to a successful end with pension sharing orders; you have the opportunity to protect yourself from lower valuations and transfer credits by building some flexibility into financial settlement documents. For instance, if other marital assets – cash, property, collectibles etc. – are available, these can be offered up to make up for any delay between the initial valuation and the actual transfer credit.

The Bottom Line

Pension sharing can be a viable method to achieve financial stability long after your divorce is finalised, but only when expectations are realistically set. Be proactive when it comes to obtaining the valuation and determining where the transfer credit will ultimately land, and make sure that you know your options if a shortage surfaces. The financial aspects of divorce are far more manageable when you remember the process of pension sharing requires equal parts time and patience, with a pinch of flexibility thrown in for good measure.