Divorce will often be challenging, but it needn’t be financially as well as emotionally draining if you plan ahead and take professional advice on how to protect your assets in a divorce. It’s vital that you consider the division of assets as early on as possible, so that you are prepared for all the possible outcomes, and ensure your future financial needs are well catered for.
Financial planning in divorce
Financial planning during the early stages of a separation is a good way to work out what assets and money you have, and what you will need to be able to move forward alone and live the lifestyle you desire.
If you are the one seeking a settlement, then you will need to look carefully at how much you will need that settlement to provide you with. If however you are on the other side, you will have to look at how much you can afford to give away to your ex-partner.
Whatever side you are on, financial planning with the help of an independent financial adviser and a family lawyer will help you understand what you have, and what you need to attain or retain following your divorce.
Protecting your business
If you are a business owner, you’ll need to consider your business as an asset. It may be that you wish to keep your company; however your ex-partner could well argue that they are entitled to a share of the business and its income. Others may have no interest whatsoever in the business.
With business assets, it’s important to work out the income generated, and how any loss of income could potentially affect your personal finances. It may be that if you can run the business without your ex-partner, it would be in your interests to retain the business as your own, and perhaps relinquish other assets, such as pensions and investments, to your ex-partner. But weighing up the value of all the assets in question to ensure there is an even split is vital.
A pre- or post-nuptial agreement is a contract signed before or after a couple marry, stipulating how money and assets will be divided up should the relationship end in divorce. Whilst these agreements are not considered legally binding in the UK, a court will consider them in context.
If you have a pre- or post-nuptial agreement in place, you may already have protected some of your wealth by ring-fencing certain assets. This is a wise move and something any financial adviser will encourage, especially if you have inherited family assets or business assets you wish to protect.
It is also possible in some circumstances to set up a trust to protect assets, in particular financial windfalls or inheritances. Whether or not this will be an effective strategy will depend upon individual circumstances, so it is vital to take independent financial advice.
It is something of a myth that assets may be protected on divorce by keeping them in sole names. As a result, it is common to see the likes of property, shares or investments being personally retained by one party for the duration of the marriage.
Where property is owned jointly, if one party dies before the divorce is finalised, the other will automatically inherit it under the Right of Survivorship. This may not be the ideal scenario, particularly if one of the parties had their own ideas as to where their share of the property should go. Sometimes therefore, the partners in a failing relationship will look to transfer assets from joint to sole names, or even to a third party, in anticipation of divorce.
However, it is vital to be aware that family courts have the power to switch the ownership of assets between the parties if they feel it would be the fair thing to do, based on other circumstances. It is therefore vital to take individual advice based on your unique situation.
Inheritances are generally treated differently to other assets on divorce, and are in fact usually easier to protect.
In English law, it is recognised that the person who left the inheritance will usually want the beneficiary to retain them. An inheritance will therefore be ring-fenced wherever possible during a separation, and treated differently to other assets.
The person who received the inheritance may protect it by keeping it in their sole name, providing they can show that the other matrimonial assets will meet the needs of the children and ex-spouse. If an inheritance is put into joint names, or is used to reduce or pay off the mortgage on the family home, then it will become much harder to protect.
Looking to protect your assets on divorce? Partridge Muir & Warren is here to help.
PMW has been providing independent financial advice throughout Surrey since 1969. As chartered financial planners, we are respected for our commitment to the industry and our exceptional standards of client care.
If you are seeking advice on protecting your financial assets during a divorce, we are here to help. Our team of legal specialists and financial advisers will work together to advise you on the best strategies to protect what’s rightfully yours. We can also liaise with your own family lawyer acting for you in your divorce, to ensure everything works in harmony throughout.
For the tailored advice you need at this time, you are welcome to get in touch with our friendly, expert team.