Divorce can be a stressful time and emotionally charged discussions can sometimes make it hard for couples to reach conclusions about splitting their finances.
While breaking up is always difficult and emotional at any age, getting divorced later in life can often present even more complications as there will be more assets to divide up, including pensions, property and investments.
The good news is, there are steps advisers can take to help the process go more smoothly, and to help navigate some of the financial minefields associated with divorce.
1. Agree a fair division of assets
Dividing the assets can often be among the most difficult parts of a divorce – particularly after a lifetime spent accruing them – so it is useful for couples to get this out of the way early.
A good starting point for couples is to begin by making a list of everything they own – including property, income, savings and any investments – and ensuring that all assets are valued accurately and honestly. If either party is unsure as to the value of their assets it’s important to avoid rough estimates. Seek a third-party valuation if need be.
When deciding on a fair split, the best course of action is for a couple to reach an amicable agreement together on as many assets as possible, rather than through expensive third parties such as solicitors or mediators.
If a prenuptial agreement is in place, it could also be worth revisiting it as a starting point for the discussions.
Finally, married couples with investment bonds will need to consider whether to surrender, assign or put their bonds in a trust for one of the parties as part of the settlement. Depending on how the bonds are handled, there may be tax charges incurred.
2. Settle joint debts
It can be surprising just how many joint financial commitments - such as shared credit cards, joint loans and mortgages - a couple can have. It is important that these joint debts are fully repaid.
Divorcees can fall into a trap of believing that a change in their marital status also changes their liability for these debts.
With any joint debts, both parties remain equally liable for repaying the full arrears and failure to do so will, in turn, jointly negatively affect credit scores.
To avoid this, both parties should agree as soon as possible how the debt will be paid and put the appropriate arrangements in place.
It’s also important to avoid accruing new debts during the divorce process. While paying off a credit card bill may seem less urgent during these proceedings, ongoing debts can quickly stack up and put additional pressure on an already strained financial situation.
Therefore, arrangements should be put in place to finance ongoing rent, mortgage and utility bill payments during the divorce process.