Separation, divorce and break ups are a very difficult time. Emotions tend to be running high and there may be children involved, which can complicate everything. However, when it comes to this stage in the ending of a relationship it’s important to ensure that you are protecting yourself. These are some of the important financial things to consider if you’re about to go your separate ways.
Splitting the assets (& liabilities)
A key part of leaving a current partnership, whether it’s a marriage, a civil partnership or you were cohabiting, is splitting up the assets and liabilities. These could be anything that you’ve purchased together or anything that you’re jointly responsible for or own including:
Possessions that you own jointly, such as furniture or a car (including the car finance!)
Bills that you’re jointly responsible for
Any investments that you have made that you share (e.g. a Buy to Let property)
Cash in the bank and/or savings
These are just a few examples of the kinds of assets and liabilities that need to be taken into account when you’re separating from a partner. It can be a lengthy process but the first step is to make a list of everything you own together and then everything that you pay for together. After that you will need to work out a fair split of who gets what and who pays for what.
Providing for children
If you share responsibility for children together then providing for their future will be a key financial consideration. Child maintenance will be payable – the first step is to try to agree between you how much this should be and when payments should be made. If that’s not possible then Child Maintenance Service may step in, to work out how much is due and/or facilitate the payments. Children make splitting finances very complicated. Even working out how custody of the children will be split has financial implications, with one partner potentially less able to work or taking on an increased burden in terms of bills or food and transport costs. There are many different factors to consider when it comes to children and the agreement may need to cover eventualities that haven’t yet occurred, such as the cost of university tuition fees or a first car. It’s often at this point that separating couples choose to seek the advice of a solicitor.
The shared home
How you deal with a property that you’ve shared will depend on whether it is rented or owned, who owns it and whether there are children who might need to continue to live in it. If the property is rented then one partner can move out and reimburse the other for a share of the rent until the end of the contract. If the shared home is jointly owned then there are a number of different options: one partner buys the other out, value is transferred from one partner to another, ownership remains the same until the youngest child turns 18 or the property is sold and the profit split. If there is a dispute over a jointly owned home and there are children involved then there are a number of different claims that can be made to the courts by one parent, including the right to stay in the home.
If you’ve been cohabiting then your pension is usually protected from your other half. However, if you have a civil partnership or a marriage then pensions are often the second biggest asset after the family home to come into contention during a financial split. Personal pension schemes, occupational pension schemes and Additional State Pension (but not the basic State Pension) can all be divided as a shared asset on dissolution or divorce. There are many ways in which pensions can be split, from a percentage share through to being entitled to a proportion of the pension payment when it starts being paid out. It’s worth noting that it is the entire pension that is taken into account, not just that accumulated during the years of the relationship.
Protecting your assets
Sometimes partners don’t behave particularly fairly during a separation or split. So, it may be necessary to go to the courts to protect your assets. If you think that there is a risk your partner may sell, transfer or get rid of certain assets (for example, by moving them abroad) then it’s important to take legal advice as a court may be able to prevent this from happening.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley