Do You Need Help Navigating Your Finances Through Divorce?
“I’ve never heard of anyone doing that before” is the most common reaction to first meeting a divorce specialist financial planner.
There are less than 40 accredited by the family justice organisation Resolution to provide this advice. But what does it actually mean in practice?
Not the money person
Marriages, or civil partnerships, are teams, and in teams, each player utilises their strengths. As a result, there will be things that each person does because they are best placed to do those jobs, or they prefer them. It may be that one prefers to do the cleaning whilst their partner looks after the garden.
In the case of money and finances, it generally falls to one person to take responsibility for researching and organising the bank accounts, insurances, mortgage, etc. They automatically manage everything money related, and it’s rarely a cause for concern.
But when a couple divorce or dissolve their civil partnership, one person may experience an additional layer of fear because they haven’t kept in touch with the marital finances and feel that they don’t understand the money side of their relationship. They don’t feel comfortable at the prospect of taking responsibility for this alien area of their new life.
There may also be concern that their ex could bamboozle them when it comes to agreeing a financial settlement. This is the point at which many clients will feel that it’s advisable to contact a divorce specialist financial planner.
The dreaded form E
When you’re working with a divorce professional, whether it be a lawyer or a mediator, almost the first thing they’ll ask for is your “financial disclosure”. This is often done using a legal document called the form E, which is 27 pages long and can send many people into a spin from the outset.
A divorce specialist financial planner works with their clients to collect the information needed to complete the form. All figures entered on the form need to be supported by evidence; for example, the bank balance will require a corresponding bank statement.
The part that people often find the hardest is the expenditure section. A factor that could possibly affect declared expenditure may be the issue of “your mate down the pub”, who tells you to exaggerate your expenditure so that you get a higher settlement. In practice, this tactic is likely to cost you more in mediation and legal fees, because if your expenditure hugely exceeds your income, it will be clear that this is not an accurate assessment of what you spend.
A reputable divorce specialist financial planner supports you in putting together a realistic current and future expenditure forecast.
Lawyers are generally not pension experts, nor should they be expected to be. However, pensions are often the second biggest, if not the biggest, asset of a marriage and should not be ignored when it comes to negotiating a financial settlement. The next stage of support should be to help the client understand their own pensions, be clear as to what they each have and to then determine whether they need the input of an actuary on their total pensions to work out how best to either divide them, or use a separate lump sum amount to compensate for the difference, known as offsetting.
Once the actuarial report is received a divorce specialist financial planner supports their clients and their lawyers in interpreting the information. This can help with working out an appropriate offer to make to the other side, or help in reviewing an offer that they make.
What does that mean for my life?
When your lawyer proposes an offer of a financial settlement or an offer is received from the other side, it’s important to understand what it actually means for you, your lifestyle and its future implications.
A good divorce financial planner will use professional modelling software to help put the offer into context, so their client will be able to clearly see and understand what they will need to earn, whether it impacts on when they will be able to retire, how much they will have to live on in retirement.
These are important questions and the answers could impact on whether the offer works for the client or not. It might be that there’s a requirement to propose a small restructure to the settlement to make the offer acceptable. It’s important to remember that compromise should be expected on both sides, as it’s unlikely that either will receive all that they wanted. It’s commonly said that if one side is happy with the outcome, it was probably the wrong one!
The New Chapter
Following the settlement being agreed and sealed by the court, there may be a lump sum order or pension sharing order to implement. A divorce financial planner will often continue to work with their newly divorced clients for many years post-divorce, helping them to design the next chapter of their lives and work with them to live the life they desire.
This is often the best part of the job, as they see their clients change and grow, as they learn to fly. Divorce has a huge impact on many of those who go through it. Having clarity about their finances can help them to move on afterwards with peace of mind about what their financial future holds for them.
Tamsin Caine is a divorce specialist financial planner & co-author of Your Divorce Handbook, It’s What You Do Next That Counts. For More Information or to order a copy of the book please go to www.smartdivorce.co.uk
by Tamsin Caine