Financial planning for divorce – what you need to know

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Financial planning for divorce – what you need to know

16 November 2021

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Preparing for a divorce is hard enough as it is, but whilst also attempting to untangle your finances, it can become incredibly complicated. Decisions are often made at an emotionally charged time, and the realities of these decisions don’t become apparent until much later. Carefully considering the financial decisions you make in divorce is incredibly important for ensuring that you can maintain the lifestyle you want after you have separated.

First of all, this is an area where having a financial adviser work alongside your lawyer, early on can have huge benefits. Most people worry about the house, yet some of yours or your partners most valuable assets might be a pension scheme.

You may also need to consider how defined contribution pensions and defined benefit schemes, within your joint estate, might work together. The future tax implications of these schemes can have a real impact on the money you might receive after a divorce. The lifetime allowance, for example, is often an area that is completely overlooked in a divorce case, and its impact could significantly reduce the level of income or capital you might be suing for, without realising it.

When finding the right financial adviser to work with, look for someone that has experience in divorce and is a proponent of cash flow planning. Using a cash flow plan early on in your divorce process can help provide a great piece of evidence for the potential future growth of joint assets and give an idea of just how much income they may provide.

If complex pension schemes are of debate, it’s likely that an actuary will also need to be involved in the process. A well-heeled financial adviser that handles divorce cases regularly can help you and your solicitor pose the right questions to the actuary and decipher the complicated report that will come back. If you do end up having to split your pensions as part of the divorce, a pension sharing order will be issued by the court. It’s important to take advice around these to ensure your share is transferred into a suitable scheme and that the proceeds are invested correctly.

Finally, before any money arrives in your account, it’s a great idea to start afresh. Draw a line under the sand and create a whole new set of financial objectives for yourself. You’re going to have a whole new set of liabilities, assets and needs now so it’s time for a full review. Make sure to:

  • Review your insurance schemes
  • Have a suitable strategy in place to reduce your tax position
  • Have a solid investment strategy to maintain yours and your children’s needs.

Find out more in this guide

How much income do you to be comfortable, how much do you need invested and how to pay less tax...

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When pulling your hair out trying to untangle the financial mess that divorce can bring don’t do it alone, find a great lawyer, a good financial adviser and make sure you get some great foundations in place for the next stage of your life.

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Saltus Financial Planning Ltd is authorised and regulated by the financial conduct authority. Information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon, as financial advice. Capital is at risk. You may get back less than you invested.

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How to structure your wealth and access income should be approached in a sophisticated way. A detailed financial plan may use pensions, ISAs, general investment accounts, offshore bonds and other tax wrappers to ensure you can draw your money in a tax-efficient manner.

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Holding multiple investment accounts and pensions can mean they’re hard to keep track of and administer. We’ll help you overcome this by consolidating your accounts into a single plan so that you can understand your financial position with ease.

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We protect our cars and houses without much thought yet you might be the most valuable asset in your family. Whatever your situation, we can provide advice to ensure you have the right level of insurance in place to keep your finances protected.

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Estate planning is more important than just having a Will. We’ll work closely with you to understand how estate planning, which has emotional as well as financial consequences, can impact your overall financial plan.

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Significant life events can present great opportunities but also considerable challenges. Whether you are going through a business sale, divorce or are receiving a lump sum, we’ll help build a financial plan to meet your changing lifestyle.

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