Financial Advisor Divorce
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Financial Advisor on Divorce
Michelle Boakes talks us through how a financial advisor can help during divorce.
What is a financial advisor on divorce?
A financial advisor on divorce is a financial expert who can advise on the various different aspects of divorce and how your finances should be arranged. For example, we can help you complete financial disclosure and implement a pension sharing order.
Why is it important to hire a financial advisor during a divorce?
The most important way we can help is to make sure that you’re dividing your assets fairly, and in the most tax efficient manner. You would instruct a financial advisor to ensure you’re making the optimal financial decisions.
Going through divorce is a really big thing. Most people’s finances change significantly. Make sure you’ve got the best financial advice possible on a full range of subjects, from tax planning to pensions investments, mortgages and even your protection arrangements like life cover.
What are the benefits of hiring a financial advisor during a divorce?
If you’re doing financial disclosure as part of your divorce, you’ll have to complete something called Form E, which lists out all your own finances plus shared marital finances. We can help with completing Form E.
Part of our day-to-day job is to gather up information about people’s investments and pensions. Sometimes, when you come to filling in forms like this, the amount of information you have to give can be overwhelming. You have to make sure you fully disclose everything as well. We help a lot of clients with Form E.
Another way we can help is in relation to pensions. After the family home, pensions are likely to be the most significant assets. We can help make sure that these pensions are valued correctly and help you consider how to split your pensions fairly. We can also help you implement any sharing orders that are put into place.
We help assess both parties’ finances as well. So if the divorce is acrimonious or things aren’t as open as they should be, we can help ascertain if any assets have been hidden.
We can also help a client present their own financial situation in the best light possible. Sometimes we can help steer the negotiations in a pragmatic direction. Plus, we identify ways to improve tax efficiency.
If you still have a mortgage you may need to know what your mortgage capacity is, to determine how to split the equity in the home. We can help with mortgage capacity reports and get you a new mortgage. We also make sure that you make the most of protection policies that you hold, and if current ones can’t be used in future, we help put new ones in place.
What are the common financial challenges that come with divorce?
There are so many. Divorce isn’t a great time for people. There’s an awful lot of emotions involved and sometimes a lot of hurt and anger. The thing that I see coming up most often for people is fairness. How do you determine what a fair split of the assets is? It’s not always 50-50. I would say that’s the biggest challenge.
Another thing that people find challenging is once the settlement is agreed, the process of getting to that point has been so overwhelming that they don’t really know what to do once it happens. What do they do with the pension sharing order? How do they go about finding a new home or a mortgage? A lot of challenges come with divorce.
What are the steps involved in the divorce process?
The best person to ask is your solicitor or any legal professional you’re getting guidance from. But our understanding is the initial step is for one partner to apply for the divorce. The next step is agreeing how to separate your finances – your pension, property, savings and investments. You would then apply for a consent order to make that agreement legally binding.
You might possibly have to use mediation if you’re not able to agree. If that fails, you would likely need to go to court, which is three further stages: a short hearing to discuss the finances and what’s led you to this point; a second financial dispute resolution appointment, and then the final hearing where the judge will determine what will happen with the assets.
My understanding is that you need to have your Decree Nisi in place before you can go to court.
How do you split finances when separating? Is everything split 50-50 in a divorce?
Every couple will be different and every divorce situation is unique. People have different arrangements in place, different marriage lengths – all sorts of things can complicate matters: children, income, inheritance.
It’s not necessarily 50-50. With the financial side of the divorce, the aim is making sure that both parties are left in a position of equal standing. That helps you to focus on what you need to move forward. It’s not necessarily that you’re entitled to half or more than half, it’s more about getting yourselves in similar positions, to be able to move on.
What is a financial settlement in divorce? How is it calculated?
The financial settlement is either how you’ve agreed to split your finances or how the court has ordered the split of the assets and finances. That can be calculated in a number of different ways.
It could just be what you’re both comfortable with. But if the court has ordered the split it will be based on fair division of the assets and making sure that both parties can move forward.
How we can help you
- We are a fee free mortgage brokerage. We do not charge our customers for any advice – we are purely paid by the lender on completion.
- We work with dozens of lenders including the high street banks and can compare their deals for you, always with your best interest at heart.
- We take away the stress and uncertainty of applying directly with a lender who may not have the most suitable deal for you.
Get in touch for a quick informal chat to discuss your options.
How can a financial advisor help with financial settlement negotiations during a divorce?
We like to help people focus on this aspect of fair division. The way we really add value is in the really early stages of the financial discussion.
We can help you see the different options on how you can split the assets, and what the implications are for each option. We can show each party what the outcomes look like, to help make the decision.
So instead of focusing on who gets what, it’s more about how life looks financially if you accept this offer, or if you counter with a different offer.
A lot of people tend to visit their financial advisor at the end of the divorce, after the financial settlement has been agreed and you’re looking to implement the financial order. But if you see us when you are starting the negotiations, we can put you in a position to feel confident that the offer that you’re taking will allow you to move forward in the best way possible.
Should I keep the marital home?
This is a tricky one. It depends on the overall situation. With any client that really wants to keep the marital home, we have a good long conversation about whether that would be affordable – and also, do they really want to keep it?
For some people it represents security and keeping things stable for the family. In other situations it is the best decision for clients not to keep the family home – even if they initially thought they would.
Taking all things into consideration people can be far better off making the break and moving on. It really does depend on the feelings of each person whether it’s right for them.
What are the tax implications of divorce? How can a financial adviser help?
There are certain tax advantages that come with being married, which are lost on divorce. We can help arrange your assets in the most tax efficient way for your new situation. There are also some complications if some assets have to be sold. We can advise on the right timing to maximise tax efficiency and avoid losing out to the taxman.
Divorce can be very expensive, so the last thing you want is to be paying more tax than is absolutely necessary. We can help make sure that the timing is right to maximise any allowances you’d be entitled to.
Another thing that can come up in taxation around divorce is if the marital home is retained by one party and the other retains a financial interest only. For example, if a couple splits up and one party remains in the property until the children are 18, while the other person moves out, that can have an implication for Capital Gains Tax. We can advise what that looks like, so that the financial settlement is agreed fairly.
There is also some relief available for a limited period of time following separation. We can make sure that you are transferring any assets in a timely manner to make sure you can get that tax benefit.
How long does it typically take to recover financially after a divorce?
It really depends on the situation, but again, this is probably where we add a lot of value. As financial advisors we can help make sure that the choices that you make in the financial settlement are best suited to your new circumstances.
We will also identify ways that you can recover. The best thing about financial advice is that the earlier you take it, the more likely you are to be able to achieve your goals and objectives.
In divorce, we will help you identify your goals #for your new situation and give you the advice you need to get there.
What tips do you have for people going through divorce?
Get as much advice as possible. Not just from financial advisors, but from legal representatives, solicitors and possibly accountants as well. Get as much information as possible.
I’d encourage everyone to be really open to exploring different options and seeing how the different outcomes can affect your future. Very often in divorce situations there’s a lot of emotion. You can get stuck with an idea of what you think is right or fair, but it’s a negotiation with two sides. Being open to different options can be really valuable and help you come to a conclusion more quickly.
Do consider mediation where possible and get yourself organised. Fully disclose everything upfront by having as much information available as possible.
What are the pros and cons of using a financial advisor like Verve in divorce?
In terms of the pros, by working with independent third parties we can make sure everything’s as tax efficient as possible; we can implement settlement advice and value pensions. Some can be tricky. We help you determine what the fair sharing rules will be.
The only con I can think of is that financial advice does come with costs. But in the long run, you’ll save money by getting good advice upfront and throughout the divorce.
Divorce planning/settlements are not regulated by the Financial Conduct Authority.
Approver Quilter Financial Services Limited & Quilter Mortgage Planning Limited 26/06/2023.