What happens to your finances when you divorce?
Divorce is one of life’s most important transitions, bringing emotional challenges alongside complex financial considerations. While the emotional aspects often take centre stage, the financial implications can have far-reaching consequences that extend years beyond the divorce itself. According to the Office for National Statistics, there were 80,057 divorces in England and Wales in 2020, with each of these couples facing important decisions about their financial futures.
- The division of assets: Navigating property and savings
When it comes to dividing assets during divorce, English law doesn’t automatically split everything 50/50. Instead, courts aim for a fair distribution based on several factors, including the length of the marriage, the age of each spouse, their earning capacity, financial needs, contributions to the marriage, and the standard of living established during the relationship. The family home often is the most important asset for most couples. Options typically include selling the property and dividing proceeds, arranging for one spouse to buy out the other’s share, or postponing sale until children reach adulthood. Each approach has different financial implications that must be carefully considered. Besides real estate, savings accounts, investments, vehicles, and even household items must be factored into the overall financial settlement. This process needs complete financial disclosure from both parties to guarantee a comprehensive and fair division.
- Pensions and long-term savings: Securing your future
Pension assets are often a substantial portion of a couple’s wealth, sometimes exceeding the value of the family home. Yet, these assets are usually overlooked or undervalued during divorce proceedings. According to research by the Pensions Policy Institute, women typically have about one-third of the pension wealth of men by their late 50s, making pension sharing particularly important for financial equality post-divorce. Divorce lawyers can help make sure these complex assets are properly evaluated and fairly divided. Options include pension sharing orders (dividing the pension at the time of divorce), pension offsetting (exchanging pension rights for other assets), or pension attachment orders (receiving a portion of pension payments when they begin).
- Legal considerations: Ensuring a fair and binding financial settlement
Maybe the most important aspect of managing finances during divorce is obtaining a legally binding financial remedy order. This court-approved document formalises the financial settlement and prevents future claims against either party’s assets. Even amicable divorces need this formal protection. Without a financial remedy order, ex-spouses can potentially make claims against each other’s assets years or even decades after divorce. The introduction of no-fault divorce in April 2022 changed how couples legally separate but didn’t alter the process for resolving financial matters. Financial settlements remain entirely separate from the divorce itself, requiring specific attention and often specialised legal support.
Understanding these financial considerations early in the divorce process can help protect your long-term financial wellbeing and provide clarity during an otherwise uncertain time. While divorce inevitably brings change, proper financial planning can help guarantee that change leads to stability rather than hardship.
