10 key aspects of finances for couples to consider to ensure ‘smooth’ separation | Personal Finance | Finance


Divorce lawyer Paul Britton, founder of Britton & Time said couples should plan ahead for the possible event that they may separate as there are several financial aspects to consider. He spoke about 10 key aspects people should think about.

Mr Britton said: “Planning ahead for these financial aspects can help minimise potential conflicts and make the process of separation smoother for both parties.

“While it may be uncomfortable to discuss these matters early in a relationship, open communication and proactive planning can help protect both partners’ financial well-being in the long run.”

These are the 10 aspects he said people need to consider:

  • Division of assets – This includes property, savings, investments, and other assets accumulated during the relationship
  • Debts – Couples should discuss how joint debts, such as mortgages or loans, will be managed if they separate
  • Spousal maintenance – Sometimes one spouse is required to provide financial support for the other. Couples should plan ahead for how this will work
  • Child support – Couples need to think about how they will financially support their children should they separate
  • Tax implications – Separating can affect aspects of tax such as tax filing status and potential capital gains tax on the sale of jointly owned assets
  • Legal fees – Going through the process of divorce or separation may involve legal fees, as couples may need to hire solicitors or mediators
  • Insurance policies – Couples should review and update life, health, and other insurance policies to ensure they are still appropriate after they separate. Beneficiaries may need to be changed or new policies may need to be put in place
  • Joint accounts – Couples will need to discuss how joint bank accounts and credit cards will be divided. They may need to close joint accounts or convert them into individual accounts
  • Retirement planning – How pensions are other assets are divided can affect both partners’ retirement plans
  • Updating estate plans – Wills and trusts may need to be changed as a result of separation, to reflect the change in circumstances.

READ MORE: Pensioners urged to think about ‘less-active years’ as state pension rises by 10.1%

Mr Britton also highlighted what people need to consider when separating couples are dividing pensions.

He said there are three main ways people divide pensions:

  • Pension sharing – The pension is divided, sometimes through a pension sharing order created by a court. An ex-spouse may be entitled to a share of the pension including private, workplace or state pensions
  • Pension offsetting – Separating couples may also choose to offset one party’s pension against other assets, such as property or investments, to get a balanced settlement
  • Pension attachment – Also known as “pension earmarking”, this is when one spouse receives a portion of the other spouse’s pension when it starts being paid.

Mr Britton said: “No one really wants to discuss the possibility of splitting up, particularly when things are getting serious, however having these discussions can be a wise financial decision, particularly if there is a large financial imbalance.”

He suggested people can also consider creating a prenuptial agreement to outline how assets and pensions are divided in the case of a separation.

Shona Lowe, financial planning expert at abrdn, also encouraged people to keep track of what their pension is worth.

She said: “Knowing the total value of your pension pots is considered good practice for managing your personal finances, regardless of whether or not you are considering divorce.

“However, when it comes to a separation it should be even more of a priority. Always get your pension valued in the ‘marital balance sheet’ when you’re discussing separation.

“But remember, only the person who is a member of the pension scheme, or who has taken out the pension, can ask for this.

“It is particularly important that those with a DB pension (defined benefit) recognise how valuable this important financial asset is and make plans for how it will be split.”

She also warned couples to be wary of the tax implications of dividing pensions. She explained: “If you’re trading-off a tax-free asset to get taxable pension rights, the tax hit must be reflected in the split of marital assets.

“The ability to share or offset pension assets can provide welcome flexibility and can help structure a settlement in a way that is tax-efficient.

“However, if you choose to do this, the pension will be taxed on the owner’s income. So, if your ex-partner owns the pension you need to consider the tax being paid on their salary. You might end up paying more tax than you would on your own income.”



Read original article here

Denial of responsibility! TechnoCodex is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – [email protected]. The content will be deleted within 24 hours.

Leave a comment