How do you unravel your finances if you get divorced?
I got married recently and currently inhabit that happy newlywed bubble that makes cynics sneer and old ladies smile.
But what if my bubble burst? How would I cope and what impact would divorce have on my finances?
Of course, I neither expect nor want to ever find out, but with the UK having one of the highest divorce rates in the world, is it naïve to assume it could never happen to me?
Indeed, the dreaded D word is being uttered across kitchen tables across the country right now as we hit the peak divorce season. At this time of year, it seems many couples come to the end of their tether, after spending time in close proximity with each other as a family, with all the pressures that brings.
Financial pressure
The economic downturn has also made matters worse than ever, with money worries exacerbating the problems of many couples.
If you couldn't afford to buy the Christmas treats you wanted to, this time of year can end up feeling far from festive. It can be particularly stressful to deal with the disappointment of children who didn't get all they wanted from Santa.
And it isn't just those on low incomes who have financial woes-- the squeeze is affecting couples in every income bracket. Wealthy bankers and high flyers who had been made redundant can feel the pressure even more as expectations from their families are that much higher.
Anyone who has been made redundant knows the strain it can put on family life, so it's little wonder that many lawyers note a marked increase in divorce applications recently. But how does the recession impact on divorce settlements and the process of splitting?
Delaying tactics
It has been noted that some husbands and wives put off initiating divorce proceedings last year because their partner's assets had dropped in value. Instead they decided to 'put up and shut up' until the financial markets improved. One theory is that many are now ready to take the money at today's prices and run.
Divorces have indeed been taking longer to settle according to recent research from trade organisation IFA Promotion. It says that two-fifths of solicitors it surveyed reckoned that the time taken to reach a divorce settlement has increased in the past year.
Most solicitors (72%) think that the economic downturn has influenced their clients' attitudes towards their divorce, with the main trend being delaying reaching a settlement until the value of their assets increased.
Now house prices have stabilised, and risen in some areas, many couples are taking the chance to divorce now.
Smaller pots
But while some spouses have been patiently waiting for their partner's stock to increase, for many the pot will inevitably be smaller -- and this can make dividing things up a lot more difficult.
When there is plenty to go round the divorce process can run more smoothly and, while every divorce is different, a typical approach has long been that the wife keeps the family home with the children and the husband takes other assets, such as pension benefits.
But lower property prices could mean that 'other' benefits are more valuable than the property. And tighter mortgage criteria means it is not necessarily easy for the party who moves out of the house to buy somewhere else. Splitting assets is now a lot more complicated.
Stuck together
Another unfortunate fallout from the recession is that many divorcing couples are forced to live together for longer, as they simply can't afford to live separately. More than one in four couples (28%) who have split have no choice but to continue living together, according to a survey by flatshare website Easyroommate.co.uk. Of those who are forced to live together 74% unsurprisingly found the experience stressful.
Homeowners can be the worst hit with one in 40 splitting couples forced to live together because they are in negative equity, on average to the tune of £12,000 -- a situation that could take a long time to escape from.
Tips if your relationship has broken down:
- If you want to deal with a solicitor who can assist with divorce and separation matters go to Unbiased.co.uk and search for one in your local area who specialises in divorce proceedings.
- If you decide to save money with a 'do-it-yourself divorce' remember these work out better in the most straightforward cases. Many companies offer their services online for less than £100 and the process can be quick and easy. But if the split is acrimonious you may prefer to speak to a solicitor.
- Speak to an independent mortgage broker to work out your options with the family home. If selling up and splitting the proceeds is not an option (it often isn't) one of you might decide to buy the other out. However tighter mortgage criteria and limited loan-to-value ratios could make this more difficult than you think. Find out more in John Fitzsimon's How a divorce affects your mortgage.
- Settlements can be revisited and renegotiated unless you go for a 'clean break' or 'consent' order. It's important that you understand this when you come to any arrangements about your finances. For example, a husband paying maintenance may want the amount reduced if he starts a family with a new partner. A clean break order is the only way to ensure that neither party can go back to court to contest a settlement.
- Consider taking in a lodger to give you financial support following a relationship breakdown. Over a third (35%) of those remaining in a house after their partner has moved out have decided to take in a lodger, according to easyroommate.co.uk.
- Find out about your pension options -- women especially can make a big mistake giving up rights to their ex-husband's pension. You can earmark a portion of a pension or split a pension into two funds. But always get additional, independent advice from a pension specialist before agreeing to anything.