Here I am talking about another cheery topic – not death this time but the other “D” word – Divorce. According to the Office of National Statistics, 42% of marriages in England and Wales end in divorce. No one who marries plans to divorce and I sincerely hope that, having been married for 18 months, we fall into the other 58%.
When splitting assets on divorce, people often get fixated on assets. They forget about needing an income to support them and will often take something tangible that has some value.
There are a number of other things that are important to consider. In this article, I will look at the financial considerations on divorce.
How much income do you need?
You may be coming out of a relationship where the other party was the main bread winner. It is important therefore to think about how much income you will need both now and in the future to:
- Pay the mortgage
- Pay the bills
- Provide for your Children
- Maintain a reasonable lifestyle
- Support your retirement
Look at the housing market – see what is out there and how much you will need. Talk to a mortgage adviser regarding how much you could reasonably afford to borrow or how much income you would need to get a house that suits your requirements or to take over the mortgage on the family home.
Sit down and budget rather than thinking about assets even if you are emotionally attached to them.
Don’t just think about now, think about the longer term. How will your retirement income be impacted by the divorce?
How will the income you need be generated?
It is important to consider, how income could be generated from your joint wealth:
- Maintenance – would your ex-partner need to pay you maintenance – how long will this last for? How would you generate income after the maintenance ceases?
- Do you have assets that could generate an income for example investments or property? How much will these generate and how much will you be entitled to?
- If you receive a lump sum payment, how will this generate an income for you and how much income will it generate?
You will need to think about the implications of income not being paid for a period of time and how this will impact you such as rental voids or falls in the stock markets. How could you do this?
Financial Considerations on Divorce
When divorcing or separating, it is important not to just think about assets, but to think about income requirements. It important to ensure expectations are fair and the amount you receive is also fair to support your income needs.
It is often a difficult task and can be overwhelming. You can use the help of specialist advisers such as solicitors for the divorce proceedings itself, mortgage advisers to help ascertain income requirements and a mortgage itself and Financial Advisers who can help with looking at cash-flow. Cash-flow modelling can help analyse how income can be generated and the implications that different factors could have on this now and for many years ahead. This can help ensure that you get a fair split of assets to support your income needs.
If you are going through this emotional and difficult time, and would like to look at how much income you require and how this could be generated from assets following the divorce, do get in touch for a complimentary initial meeting.