How to build strong financial foundations in divorce

Divorce is one of the most difficult subjects to talk about. When relationships come to an end there are so many things to consider. Children, home and support are naturally the first things you focus on.

Thank you to Richard Higgs – Chartered Financial Planner for this useful article. Richard features in The Hug Directory and would be delighted to speak to you further about this. Contact him HERE

When you begin the process of separating a shared life the sheer number of things to deal with is daunting and naturally you will want to surround yourself with people you can trust and who have your best interests in mind. Whilst this is important, I believe it is also important to seek an unbiased, balanced view when it comes to understanding your financial position and options. The cost of divorce can have a major impact on both your immediate finances and plans for later in life. In the first of this 3-part series I will outline what I consider to be the foundations for your financial future, your home and protecting your long-term financial position.

What is a clean break financial order?

Your Family Home & Your Mortgage

In some cases, it is very straightforward, and the home can be sold with an equal split of equity taken from the property allowing you to go your own way and buy your own home.

However, it can often be the case that deposits and/or contributions to the household finances have been made in unequal proportions, especially when you have had children, which can lead to a sense of unequal entitlement. If you find yourself in a situation like this, I believe it is important to firstly assess your options and understand the practical implications of your options.

Building a strong foundation after divorce

Once you know the options available to you and your preferred outcome, you will need to get the property independently valued and understand how much you can borrow whether you wish to buy out your ex and stay in the property, sell to your ex and find a new property or you both agree to sell and buy new properties. If you choose to stay in your current home, you may need to investigate your options with your existing lender to understand the implications and if you choose to buy elsewhere you may want to secure a Decision in Principle before you start house hunting. Whichever path you take, it is always wise to search the market to find the best mortgage for you in terms of cost and suitability.

A Stable Financial Position

Divorce represents a major a change in your personal and financial status. Your financial security should certainly be a focal point of any negotiations and a full review of your financial protection arrangements should be completed.

How am I going to afford to live after divorce?

This is because you may wish to cancel joint policies, or policies that are written for the benefit of your ex, or because you may lose protection provided via your ex’s employer.

Creating a strong financial foundation for th rest of your life

Conversely, there may well be good reason to maintain some of your existing policies, especially where maintenance payments or other financial support arrangements are involved and you will rely on your ex’s income to meet your day to day living cost and/or the upbringing of your children.

How can I afford to get financial support from my ex?

Alternatively, your ex and your children may be relying on you, as such you should ensure that you and your ex hold appropriate cover written on the correct basis that ensures you can continue to receive/provide financial support should you fall seriously ill or die.

Writing insurance under legally binding trusts and ensuring appropriate trustees are appointed could be considered essential planning

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to a suitable financial planning strategy, you should seek independent financial advice before embarking on any course of action. The value of investments can fall as well as rise and you may get back less than you invested. A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken. Levels and basis of reliefs from taxation are subject to change and depend upon your personal circumstances. Your home may be repossessed if you do not keep up repayments on your mortgage. The Financial Conduct Authority does not regulate estate planning, wills, tax and trust advice.

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Written by The Group Hug


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