Divorce and Finances: How to Deal with Money Worries on Divorce
Starting divorce proceedings can be overwhelming and painful for all involved but getting a grip on your finances can help smooth the transition to the next chapter in your life.
When marriages break down it’s not just the emotional trauma and the effect of the split on you, your partner and your children, but also the significant financial worries that divorce inevitably brings.
Finances are understandably the last thing anyone wants to think about when facing a divorce but tackling the thorny issue early on will help everyone in the long run.
Questions such as: How will we divide everything? Who pays the mortgage, bills and children’s expenses? Will I have to move house if I’m not the main breadwinner?
These questions sound pretty obvious but delaying discussing them with your soon-to-be ex can cause more pain down the line.
Understanding your rights when it comes to divorce proceedings can also give you greater confidence in how to handle what will probably be the most difficult period of your life.
A recent landmark ruling by the Supreme Court on the case of two wronged wives, Alison Sharland and Varsha Gohil, has opened the doors for spouses to receive their fair share from an ex who deliberately lies about their true income.
In their cases, the ex-husbands had been dishonest about their financial status and will now be forced to pay their ex-wives a greater share of the matrimonial assets.
The case highlights the need to be diligent about what your financial rights are and to work with your ex to come to a mutually fair financial agreement.
This case involved big money but even if your assets are not in the millions it pays to be prepared and knowledgeable about what you are entitled to.
In Britain around 10.8 marriages in 1,000 end in divorce (Office of National Statistics 2012). The latest figures show that there 118,140 divorces in the UK each year, with 48% of marriages that ended in divorce having at least one child under the age of 16.
If you are considering divorce or are going through one, it’s a good idea to understand the financial issues and know your rights.
So before you start dividing up the CD collection, read our practical guide to help you through the financial side of divorce as divorce finances can be very convoluted.
If you are considering divorce, it’s a good idea to understand the financial issues and know your rights.Click To TweetDivorce Finances 1: Can I Afford to Get Divorced?
When entering divorce proceedings you have two options:
1) Do-It-Yourself Divorce:
If your finances are straightforward, there is no property involved and the divorce is amicable, you can apply for a divorce online, without using a solicitor.
There are various companies offering DIY divorces, such as quickie-divorce.com and the Cooperative. The costs range from £30 to £150 but you will also pay an additional £385 in unavoidable court fees on top of the online service.
DIY divorces do not exist in Northern Ireland, where, by law, you must appear before a judge, however, you can represent yourself if your divorce is straightforward.
2) Using a Solicitor:
Couples expecting custody issues or have complicated finances and joint property will need to seek legal help. Many law firms offer a fixed divorce fee ranging from around £500 to up to £10,000, depending on the complexity of you and your ex-partner’s finances.
Remember – you may be entitled to help with court fees if you are on benefits or a low income. You can find more advice about this here.
Divorce Finances 2: How Do We Divide Up Our Finances?
Divorce can become lengthy and acrimonious if the couple cannot reach a mutually satisfying financial agreement. So it’s a good idea to try and sit down with your partner at the beginning of divorce proceedings to come to an agreement on your finances.
This will be easier if there are no children involved and one partner is not financially dependent on the other.
However, marriage is rarely simple so this is not always possible. If you have children, or one partner took time off to raise the children and so has less earning capacity, or you have joint property, then you will need help from a solicitor.
They will take you through a number of steps to help you come to a financial agreement. Remember, solicitors cost money so if you can come to a prior agreement yourselves, you will save on your divorce.
You could also consider using a specially trained Mediator to help sort out your finances during a divorce, which can be more cost-effective than a solicitor. You can find out more information about mediators here.
Divorce Finances 3: What about Child Maintenance?
If you have children, both parents are expected to pay for the cost of bringing them up to the age of 16. There are four options to decide how much is paid and when:
1) By yourselves: You come to an agreement for maintenance together, without third party help.
2) Direct Pay: The Child Maintenance Service (CMS) will decide how much each parent will pay and you decide how it is paid between you.
3) Collect and Pay: The CMS decides how much and collects it from one parent to pay to the other.
4) Court-ordered: Where a court decides how much should be paid and when. This is used when one parent is on very high income (more than £156,000 per year), to pay private school fees, or one parent lives abroad.
Divorce Finances 4: What Happens If We Were Never Actually ‘Married’?
If you and your partner were living together, you have very few rights compared to married couples, even if you, as the law puts it ‘co-habited’ for 20 years. If you can agree on a settlement between yourselves you can have this legally documented by a solicitor.
In terms of property, if it is in the name of only one partner then the other will have few legal rights to stay in that property. If your split was less than amicable you may consider talking to a solicitor to help mediate, but this can be costly and take time.
If you have children together then you can apply through the Child Maintenance Service for payments from one partner to the other, as married couples.
Divorce Finances 5: How Can I Protect My Home?
If you have joint ownership of a property then your solicitor will help you decide on one of four options:
1) Sell the property and divide the proceeds.
2) One partner can buy the other out.
3) You both continue to own the property (and pay a mortgage on it) but one partner stays and one moves out.
4) One partner can transfer part of the value of the property to the other partner. The partner who transferred the value can still keep a stake or interest in the property which will be paid out when it is sold.
If your home was in your ex-partner’s name and not yours you may still have a right to it, particularly if you still have children living there. Here’s how:
If your property was registered with the Land Registry, you can apply for a ‘matrimonial home rights notice’ which will show your interest in the property.
If the notice is approved your ex-partner cannot sell the house without informing you. If there is the threat of a sale, you should apply for this notice straightaway.
If you have a mortgage on the property then you must contact your mortgage lender to inform them of your divorce. This is particularly important if you feel you cannot pay your mortgage or your ex-partner is refusing to pay or his/her share.
Divorce Finances 6: What about Shared Debt?
You may have debts with your partner or you may have them in your own name but it is important not to ignore them, as money is likely to be tight following a divorce.
The best way to tackle debts is to prioritise, as couple, which debts you can pay off outright.
If you have joint debts with your partner, such as a mortgage or personal loan, you need to agree how much each will pay towards the debts and how. It is advisable to keep a joint account, even if you are divorcing, to pay the debts each month.
If your ex-partner will not pay his/her fair share of the debt, or they are unable to pay because of unemployment etc. contact your lender immediately and they will help you work out a payment plan.
The best way to tackle debts is to prioritise, as couple, which debts you can pay off outright.Click To TweetDivorce Finances 7: Am I Entitled To Benefits On Divorce?
You may be entitled to an increase in tax credits when you split and also a reduced rate of Council Tax if you become the single occupant of your property. Find out more here.
Divorce Finances 8: Spousal Maintenance – What Is It?
When one partner cannot afford to live without financial help from the other partner, for example a mother with young children who does not work, they may be entitled to a maintenance payment.
To see if you are entitled to spousal maintenance, you must first consult your solicitor who will guide you through the application process.
Divorce Finances 9: Is My Ex Lying About Their Finances?
As in the case of the two wronged wives already mentioned, you may be suspicious that your ex isn’t being up front about how much money they have. In this case, consult a solicitor immediately, even if your divorce has been finalised.
Where to Get Help with Your Divorce:
If you are worried about any aspect of your divorce, the following organisations can help:
Over to You!
What are your experiences of dividing your finances during a divorce? What worries did you have? Have you got any divorce advice for women?
Let us know if the comment box below!
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How unfortunate that this kind of post has to exist at all… but you’ve certainly covered the topic thoroughly. There’s lots to think about in here.
Hi Mel, thank you for taking he time to leave a message. There are definitely lots of things to think through during a divorce. As a result, it is important to plan ahead in advance so you make logical decisions.