Regardless of the circumstances, Divorce is one of the most painful, stressful experiences a person can go through and it’s important to surround yourself with trusted family and friends who can support you.
It’s also important to pay attention to your wealth and finances during this difficult time. Your assets, investment strategy and financial future are likely to all be thrown into chaos by a marital split and therefore, it can be hugely helpful to seek a professional financial planner to manage these areas sensitively, and sensibly.
Where financial planning appears during Divorce
Over the years, we have supported a large number of clients during their divorce and it is much better to seek financial advice early on in the process, if possible. Once you have appointed your solicitor and started completing Form E (listing your assets), consider contacting a financial planner at this stage.
If you leave matters until the settlement stage, then you may miss opportunities for a financial planner to recommend some important and valuable changes. At this point, the assets have been distributed and the window has closed to conduct the careful planning required to avoid unnecessary taxes or damage caused by the splitting of your assets. An example of this can be demonstrated through Capital Gains Tax (CGT). If any assets are liable to CGT, then a financial planner might be able to help you organise an inter spouse CGT exemption (assuming any transfer of assets is completed before the end of the tax year, during which time your separation occurred).
A financial planner can also be invaluable at the “Form E stage”, helping you gather all of the information you need about your finances and assets. This can be especially useful if you were not heavily involved or familiar with managing these areas during your marriage. It is really important to make a full list of everything you own, where they are and how much they are worth. Failing to do so can have serious consequences during a divorce case, particularly if one party tries to conceal an asset from negotiations. Non-disclosure can also sometimes happen by mistake, particularly in the area of pensions. Again, this can have serious ramifications, so engaging a financial planner early on in the process can help you to avoid any oversights or mistakes in this regard.
Post-settlement financial planning
Financial planning can be valuable during divorce negotiations, but it is also highly beneficial once the settlement is completed and the time has come to move on with your life. During your marriage, it is likely that you and your spouse made joint financial decisions about your future together. You likely both shared the same lifestyle and perhaps took a similar approach to investment risk and loss. Now you have a new life, it is quite likely that you are faced with a different set of financial goals, risk tolerance or lifestyle. You might imagine a different future, which requires a new financial plan to get you there.
Engaging a financial planner at this stage can help you set out a new strategy to achieve your new aspirations and put things in order for your own future. Doing so can help give you a new sense of purpose, security and peace of mind about the road ahead.
In the short term, it is usually wise to keep a reasonable portion of your assets in cash, in case of emergencies and to help get you back on your feet. As you navigate the first few months and years following the settlement, a financial planner can help you start moving assets into a more appropriate place once everything is clearer.
The immediate financial concerns are, of course, to ensure you can meet your necessary expenses month-by-month and avoid falling into debt, which can easily spiral out of control. However, at the right time, it is also important to start planning for the longer term, paying attention to areas which are often neglected by divorcees such as their pension. A financial planner can help you invest in these areas with the right timing, helping to bring focus to those important areas in need of attention.
If you need to discuss your current situation or financial plan with one of our experienced team here at FAS, please do give us a call.