The importance of financial planning advice after a divorce
Divorce can be a very challenging life event, shaking the very foundations of your emotional and financial stability. Firstly, there’s the obvious financial stress and figuring out how you are going to manage on one income, potentially moving to a new home, maybe even starting a new career. Then there’s the legal stress of paperwork and making life-altering decisions while you’re feeling emotionally exhausted.
Navigating this new chapter can feel overwhelming, especially where your finances are concerned. Many people – men and women alike – face unfamiliar territory, including solo financial decision-making, potentially reduced household income, and the challenge of rebuilding financial security from a new starting point. Having the right financial planning advice after divorce – at this crucial stage of your life – is essential so you can start to take control of your finances with more confidence and know that your financial future is more secure.
Retirement planning considerations after divorce
Divorce often necessitates a complete overhaul of your retirement plans. The division of assets, including pensions can substantially alter your anticipated retirement lifestyle, including what age you can realistically retire. This is why it’s essential to reassess your financial plan following a divorce, taking any changes into account and what new financial responsibilities you are likely to have going forward.
Many people make the mistake of waiting for their Financial Order to come through first before seeking financial advice and reviewing their financial plan, but this can cost you valuable opportunities to stabilise your finances, explore potential investment options appropriate for your new circumstances, and most importantly, develop the financial independence and confidence needed to thrive in the future.
Asset Division and Property Settlements
The division of assets and property settlements are often the most contentious and complex aspects of a divorce. Navigating this process with clarity will help to ensure a fair and equitable outcome. Begin by taking inventory of all marital assets, including property, vehicles, investments, retirement accounts, and valuable assets. Understanding the value and ownership of these assets is crucial for equitable distribution.
The family home often represents a significant portion of marital assets. Deciding what to do with it can be a difficult and emotional decision, especially if you have young children. You may choose to sell the property and split the proceeds, buy out your ex-spouse’s share, or continue to co-own the property under specific arrangements. Each option has its financial and tax implications that you need to take into account.
The transfer of assets between spouses is normally exempt from Capital Gains Tax; however, this may not be the case after the relationship has legally ended. Likewise, the disposal of investments could potentially have tax consequences if they are sold as part of a financial settlement. This is why taking financial planning advice as early as possible following a separation is key to ensure you are not paying more tax than you need to.
Assessing protection needs
One area that often gets overlooked during divorce is the reassessment of insurance and protection needs. Joint life insurance policies previously established to cover shared debts or provide for family members should be reviewed to ensure they align with your new circumstances.
You may have been protected under your former spouse’s employer-provided health insurance or have death-in-service benefits through their employer and these should be reviewed and updated following separation and divorce.
The benefits of involving a Financial Planner early after separation
When you’re dealing with the emotional turbulence of separation, making sound financial decisions can be challenging. Alongside a solicitor, a financial planner can help you have a better grasp of your financial situation with a clear plan for the future, so you can focus on rebuilding your own financial security and confidence.
Remember that rebuilding your finances is not just about recovering from the financial impact of divorce, but also about setting new goals and creating a pathway to financial independence and security. With careful planning and the support of our experienced financial planners, you can overcome the financial challenges of divorce and embark on a brighter, more secure future.
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
Although the content of the article was correct at the time of writing, the accuracy of the information should not be relied upon, as it may have been subject to subsequent tax, legislative or event changes.
