Earlier this week the Telegraph ran an intriguing article on women and divorce. Entitled Top Five Financial Mistakes Women Make in Divorce, it set out a list of common blunders made when marriages come to an end.
According to the feature, the top five mistakes are as follows:
1/ Fighting to keep the family home instead of settling for a share of your husband’s pension.
2/ Splitting the total pension pot rather than pension income.
3/ Accepting asset valuations at face value.
4/ Failing to identify and control all debts as each partner is jointly responsible for these.
5/ Failing to finalise the legal arrangements and protect against any future demands by your former partner.
Curiously the Telegraph chose to illustrate the article with a photo of a lady who appears to be in her 80s, as though divorce somehow synonymous with retirement! Nonsense of course. Whilst it is true that the numbers of older people splitting up is climbing, you are still far more likely to divorce in your 30s and 40s.
The advice offered in the article is sensible in many ways, and I applaud the focus on financial pragmatism, but as a family lawyer I feel the journalist has missed a few potential issues, For example, an advisor called Hannah Foxley is quoted in the article saying: “…you should close any joint savings accounts and split the assets.”
But have they considered what would happen if that joint account is later allocated to the wife in its entirety as part of the final settlement? It could – and does – happen.
Here is my own financial advice for women (and men!) who are embarking upon divorce. I am, of course, not an independent financial advisor like the experts quoted in the Telegraph article, but I do have 30 years’ experience advising more than 12,000 clients on these matters.
1/ Choose a experienced family solicitor, if you can afford one. You must decide upon the lawyer who will represent you and steer your case to its conclusion. Your decision is important – your solicitor can make or break your case.
2/ Consider the various methods of divorce and the associated costs. Your choice must also be agreed with your spouse. Options on offer include ‘DIY divorce’, mediation, collaborative divorce and family law arbitration, in additional to ‘regular’ lawyer-assisted divorce.
3/ When the break first occurs, consider your financial needs and your children’s financial needs as well. Do you have any urgent requirements? How are you going to manage financially until a full financial settlement has been agreed? Immediate needs are called “interim” by lawyers.
You must also consider the following questions: what assets do you need to protect? Is there anything haemorrhaging money that might be due to you? A credit card that needs to be stopped? A bank account that should be frozen?
You need to think fast but please, don’t panic It’s rare for anything to go wrong that cannot be put right. Even if your wealthy spouse walks out leaving you with nothing, you may get a small overdraft from the bank, or borrow on credit cards or make an immediate application to the court for interim maintenance. Your solicitor should be able to advise further.
When I sit down with a new client for the first time, I consider how best to protect them. For example, what about assets held in one name only? How is that asset to be protected? It is possible to register a charge at the Land Registry in relation to property owned solely in the name of the other spouse, if you have proceedings underway.
In more complicated situations it is sometimes necessary to apply for an injunction, not only to protect assets but also to obtain documents or computers that might help you obtain a clear financial picture if your spouse is devious. Again, these are extreme situations, which usually only arise when more sensible avenues have been exhausted. But think carefully about your situation and what you know about the finances in your relationship. If immediate action is required to stabilise your position, take it. Prevent losses from mounting and monies from being spent, monies to which you may be entitled.
4/ Keep what you have. If there is a significant sum lying in a joint bank account, you will have to consider what to do with it. The least controversial option is simply to freeze the account. It may not be a good idea to divide it up, because not all assets will be divided equally and you may be agreeing to divide an asset that will later come to you in its entirety.
Write to your bank, asking the bank manager to refuse to pay any money out in the absence of joint signatures. If other assets are held in joint names, such as stocks and shares, you should write to the broker in the same way. If there is a drawdown mortgage, you should write to the building society, to ensure that your written consent is obtained before any future drawdowns (payments) are made.
It is essential to take steps to preserve the status quo, but it is also essential to ensure that you are left with the ability to manage your finances during the interim period before a full financial settlement has been negotiated. You will need money for the children too. The payment of school fees is a frequent source of argument, and I would suggest that school fees are paid out of income rather than the capital in your marriage. More likely than not, the capital will be required to pay for two houses.
Of course, these are only general principles. Every divorce is different – just as every family is different.
Getting divorced is never easy. Your previous life has been tipped over and its contents spilled all over the floor. There are so many decisions to make – some practical, some emotional, and all pretty vital. My recently published book Divorce & Splitting Up: Advice from a Top Divorce Lawyer, is filled with clear advice and practical guidance. You can download it for your Kindle, or buy it in paperback.