Divorce can be stressful and painful. Ending a significant relationship usually has a significant emotional impact and there’s a lot to think about when it comes to the legal aspects of ending a marriage, too. But it’s also important to consider your finances when you divorce. Getting divorced can be an expensive process, and you’ll also need to think about setting up your new life outside of marriage. Given that 42% of marriages end in divorce, it’s something to consider even if you’re currently loved-up. In this article, we’ll run through some of the most important things you need to consider when it comes to dealing with finances during and after your divorce.
Legal costs when you divorce
How much your divorce will cost in legal fees will depend on whether you and your ex-partner can agree on how to split things. You will need to work out the custody arrangements for your children, as well as how child maintenance payments will be handled (money paid towards a child’s living costs when one parent is no longer living with them). You can also divide up your shared assets such as property, and may also divide your money.
Uncontested divorce
If you can come to an amicable agreement with your ex, you will only need to pay a lawyer to deal with some of the fine print. This is called an uncontested divorce. The person seeking the divorce (the petitioner) will need to pay £593 as a divorce centre fee, and if a solicitor is instructed, around £700-2000 in their fees. The other partner (respondent) will not need to pay the divorce centre fee, so their costs could be around £400-800 (MoneyHelper).
There is the option of ‘DIY’, which is available in England and Wales, or for certain couples as a ‘simplified’ divorce in Scotland. This means handling the forms yourself. Whilst you’ll still have to pay the divorce centre fee, it can cut the cost of appointing a lawyer. However, there could be legal ramifications later on if you haven’t got full court approval.
Contested divorce
If you can’t come to an agreement with your ex, you may need to take the case to court. Before you reach that point, you could try going through mediation. This is where a third party works with you to try and reach a resolution. Mediation will cost about £50-£120 for an initial meeting, plus up to £1,500 for the full course of sessions, depending on how long it takes.
You could also seek family arbitration. This is where a third party listens to the evidence and makes a decision. You will need to appoint and pay for a professional arbitrator, with costs ranging from £220 – £3,500.
Taking your divorce to court can be very expensive. A solicitor’s fees and court fees for a court case could run to the tens of thousands, depending on how long your case takes. While you may be eligible for legal aid in some special circumstances (for example, domestic abuse is involved in your divorce), in most cases you would only be able to claim for mediation (and this is means-tested). So don’t count on this to cover the cost if you go to court.
Dealing with joint accounts and bills
Just because you’re divorcing, doesn’t mean you don’t have to pay the bills. But this can become complicated if you’re using a joint account. You should notify your bank as soon as possible to let them know you are separating from your ex-partner; they can make changes such as needing agreement from both parties before money is taken out, for example. If you want to close a joint account, you will both need to agree in writing.
You will need to make sure you take a name off, or cancel, store card accounts, insurance policies, and energy accounts, if held jointly. If in doubt, call your provider to check their recommended procedure.
Be aware that if you leave credit accounts, loans or mortgages in both your names, you will be legally responsible if your ex doesn’t pay their share. So it’s very important to act quickly and notify your providers.
Dividing your assets when you divorce
An important financial consideration is splitting any shared assets like property, savings, investments and pensions. It is useful to do this before the divorce itself is legally finalised, because you’ll then lose the privileges of a married couple, such as tax breaks, which might make it more difficult to transfer assets between you.
When it comes to dealing with a home you both own, you have a few options. Which one is right for you will depend on both your financial circumstances. For example, you could choose to sell the home, or if one of you has the requisite funds, you could buy out your partner or vice versa.
Don’t forget to consider your pensions when thinking about how to divide your assets. In England and Wales, the total value of each of your pensions can be taken into account, whereas in Scotland, only the money saved during your marriage or civil partnership counts. You can choose to offset your pension: you keep your pension and your partner gets more of other assets equal to that value; you can earmark the pension so your partner gets income or lump sum death benefits from it in the future; or you can split pension benefits. Be sure to research the pros and cons of each approach before making a decision.
Joint financial assets should be shared out equally, as when you’re married, it legally belongs to both of you. Other financial assets owned in your name or your partner’s name only don’t need to be shared (unless you agree to do this). But it’s possible to make a claim if you can prove that you’ve suffered ‘economic disadvantage’ or your partner had an ‘economic advantage’ due to the relationship.
If you need to share out investments, you can either do this by transferring your stocks to your ex-partner’s name or cashing out so you can split the money. It’s worth checking this with a financial adviser, because there may be tax implications.
Preparing for life on your own
Aside from the legal costs associated with divorce, there’s also the cost of setting up a new life on your own. You should consider:
- Where you will live. If you are no longer living in your shared home, are you going to purchase your own property? Can you borrow enough money to cover the cost on your own, and will one salary be enough to cover repayments? Could you rent or get support from family and friends?
- Transport. If you shared a car and have decided not to transfer this asset entirely to you, you might need to think about your transport options, whether this is buying your own car or using public transport.
- Banking. If you were using joint accounts, you will need accounts in your own name.
- Insurance. If you had joint insurance, you will need your own policies that reflect your new situation.
- Everyday costs. Surviving on one salary might take some adjustment, depending on how much you shared with your ex.
- Saving for the future. If you were relying on your ex-partner’s wealth to keep you afloat in future, unless you’ve managed to get a share of their pensions, you may need to put plans in place to prepare for retirement on your own.
Caring for children
If you and your ex had children, it’s important that they’re provided for. If your ex isn’t living with you and your child(ren) anymore, they will need to pay child maintenance. This is a regular payment towards living expenses, bills or rent, and is not taxed. It doesn’t need to be paid if care is shared between the parents equally.
Child maintenance can be arranged voluntarily between you, you can apply to the Child Maintenance Service to arrange it, or you can go to court to sort it out. It may be necessary to go to court if your case is complicated (e.g. your child needs more money to cover a disability or special education).
Don’t be afraid to ask for help
In a stressful time, it’s important to get support from professionals. An independent financial advisor is a good place to start. You can connect with vetted experts on Maji for help with how to get yourself ready for a successful single life. You can also use Maji to create a financial plan to map out your assets and track progress towards your financial goals.
IPhoto byPhoto by Siora Photography on Unsplash
