Hi there, for those of you who do not know me, my name is Frankie, and I am founder of Frankie’s, an exclusive membership community for women to connect, collaborate and engage with finance! I have been running the AllBright Investment Club for nearly four years, as well as writing a monthly column in the AllBright Post to answer some of your finance questions!
I work alongside my clients to provide specialist financial planning and wealth management advice, and now I’m bringing that expertise directly to you and every woman at any stage of their wealth-building journey.
For this month’s column, I have had the pleasure of sitting down and speaking with Vanda James, Collaborative Lawyer and Family Partner at Birkett’s Law Firm. Together, we will be answering the questions you asked about divorce and separation.
What happens to shared savings if we split up?
If you and your partner separate, the division of shared savings depends on several factors including whether you're married, in a civil partnership or cohabiting. Generally, shared savings are considered a joint asset and the approach to dividing them will depend on the nature of your relationship and any agreement you may have in place.
Marriage or Civil Partnership
If you're married or in a civil partnership, any assets, including savings, will be divided in a way that is fair, but not necessarily equal. Factors such as the length of the relationship, each partner's financial contributions (both direct and indirect) and the future needs of both parties, including those of any children, will influence the decision.
Savings in joint accounts are typically split between both partners, but the overall financial settlement will also factor in other existing assets and liabilities.
Cohabitation
For unmarried couples or those in non-legal partnerships, the situation is a bit more complex. There is no automatic right to a share of savings simply because you lived together. It is important to know there is no such thing as a ‘common law husband or wife’. Even if you have lived together for a long time, you do not have automatic legal rights. If the savings were accumulated in a joint account, they are likely to be divided equally unless there is some argument for one partner to retain more based on their contributions or other factors. However, if the savings are held in individual accounts, the other partner will not be entitled to a share unless they can demonstrate they are held on trust or they have a right to them under a formal contract such as a cohabitation agreement.
Agreements
In all scenarios, it is advisable to try and reach a mutual agreement with your partner on the division of savings and other assets. If this is not possible, do seek legal advice as there are several ways a family lawyer can help which avoids going to Court. These include mediation, collaborative practice or by using the Resolution Together model which allows a couple to use One Lawyer in some circumstances. Ultimately, while the division of savings can be straightforward it is important to understand your legal rights and obligations to ensure that any settlement is fair and reflective of your contributions to the relationship.
What should I do first financially if I’m considering divorce?
When starting to think about getting a divorce, it is so important to start by taking stock of your financial situation, combined. This will include all your assets, debts, income and getting a clear idea of your outgoings. Once this is mapped out, you will have a clearer image in your head of how things might look once divided.
It’s important to be realistic about the financial implications of divorce, particularly if one party is more reliant on one, than the other. Which is very much often the case. You need to consider how much you’ll need to maintain your lifestyle. Deep diving into your expenses will help you create a realistic picture of how this looks for you.
You might find that there are adjustments required to your expenses, career, or income which are necessary to support you as you look to make this decision, and it is important to ensure you have reviewed this and planned for it. An example could be, that you take on additional work or go back to work to support yourself as a single-income household, but this may leave you with childcare considerations which then need to be planned for, reviewing what a fair division of assets and maintenance looks like moving forward.
In my experience, often people can become fixated on their immediate needs and less focused on the longer-term future. I find that individuals are focused on maintaining the house and can find themselves locking too much value into this single asset, that doesn’t generate future income (remember you will always have somewhere you need to live). Potentially ignoring other investments, pensions and savings which could have a much greater impact and income-generating potential for the future.
Seeking professional advice could be invaluable for you if you find yourself in this situation. This is to ensure your settlement works tax-efficiently and supports your financial future.
Finally, make sure your financial agreement is formalised and legally binding to safeguard against future changes in circumstances, such as new partners or disputes, ensuring everyone is protected.
How can I make sure my kids are taken care of if something happens to me?
It’s crucial to have an up-to-date will, especially post-divorce as your will is not revoked by divorce, only marriage. Within your will, for those of you whose children are minors (under the age of 18), it is paramount that you outline who you would like to be guardians for your children and look after them should anything happen to you prematurely. By ensuring this is in place you have the peace of mind that you have decided for your children’s wellbeing moving forward, rather than leaving this as a decision for the state.
When thinking about your children, factor in their ages and their future needs. Once you have reached an agreed settlement, I would highly recommend taking out some form of life insurance or family income protection benefit. The latter being my preference as it allows you to protect against a monthly income for a set period (usually until a child reaches a certain age, 18 or 21) and ensure these payments are linked to inflation. By structuring the protection in this way, should any unforeseen circumstances arise, you have the peace of mind that your children will continue to receive maintenance payments in a structured way. Life Assurance or policies that pay out a lump sum are very useful in situations such as clearing an existing mortgage or debt and giving you the peace of mind that in the unlikely event anything happens to you, your children will be set up with a safe and financially secure position as possible.
What are the benefits of a Prenup?
Firstly, a Pre-Nup is a legal contract entered into by a couple before marriage or civil partnership outlining how their assets and finances will be divided if the relationship ends. Whilst often associated with celebrities, Pre-Nups offer significant benefits to any couple who want clarity if the relationship were to end.
It sets out exactly what will happen to your money, property and other assets if the marriage ends. This can help avoid ambiguity and prevent costly, stressful disputes at what will be a difficult time.
Protecting what you bring into the marriage
For individuals entering marriage with significant personal assets such as property, inheritance or a business, a Prenup can offer crucial protection. It can ensure these assets remain separate and not automatically subject to division in the event of a divorce. This is particularly important for individuals who want to preserve wealth that pre-dates the marriage.
Safeguarding family assets
Prenups can be useful for those with children from previous relationships. A well-drafted Prenup can ensure children from previous marriages or partnerships receive specific financial provisions. This can protect family assets or inheritance from being divided
Encourages Open Communication
Discussing finances openly before marriage can strengthen a relationship by addressing potential concerns early on as both partners have an opportunity to express their views on money, property and other financial matters, and this can foster transparency and trust.
Flexibility
Prenups can be updated during the marriage as circumstances change and this flexibility ensures the agreement remains relevant throughout the relationship.
By setting clear expectations ahead of time, a Prenup can help avoid prolonged legal proceedings and reduce future stress. Seeking legal advice early on is important particularly as one of the important things to remember is that Prenups must be signed at least 28 days in advance of the wedding.
We hope that you have found this piece useful, but for anyone who would like some more information in an informal conversation with myself or Vanda, please do not hesitate to reach out to us. And for those of you reading this and wanting to start the new year on the right foot with your financial planning, at Frankie’s, our membership offers support at every stage of your journey. Delivered through a combination of 1:1 support with our Annual Financial Health checks, regular events and the ability to grow your financial knowledge and network! Want to find out more? Book a call, we would love to have a chat!
Disclaimer
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