Although it is perfectly possible to invest money during the divorce process, untangling finances is difficult, and decisions made at the time can have significant and long-lasting consequences for you and your finances. Often, decisions are made in an emotionally charged environment and the realities of these financial decisions don’t become apparent until much further down the line.
Although it is perfectly possible to invest money during the divorce process, untangling finances is difficult, and decisions made at the time can have significant and long-lasting consequences for you and your finances. Often, decisions are made in an emotionally charged environment and the realities of these financial decisions don’t become apparent until much further down the line.
If you have a family law issue and you feel you need legal advice, contact specialist family solicitor Mark Heptinstall of Slater Heelis Solicitors. He is recognised as a ‘Leading Individual’ in The Legal 500 and ranked in Chambers UK, and is described as having “the amazing ability to bring calm into troubled waters”.
If you have money to invest, a financial planner may help you make informed decisions about your finances and investments during and after a divorce. They can help structure your finances and advise you on how to invest a lump sum. Transferring assets, or investing them, during a divorce can be seen as signs of an attempt to exclude them from the matrimonial pot. The court can take action to prevent this, and may order the person transferring the assets to pay some or all of their spouse’s legal fees. It may also off-set other assets to compensate the other spouse.
What are the safest investments to make during a divorce?
It is important to make careful investment decisions, as financial assets will be scrutinised during the financial settlement. The safest investments during a divorce typically involve minimal risk and ensure transparency, as anything perceived as an attempt to hide or undervalue assets could negatively affect the outcome.
- Placing funds in high-interest savings accounts is considered a safe and straightforward option. These accounts offer liquidity, transparency, and little risk, making them less likely to be questioned during the settlement process.
- Another safe option, UK government gilts can be bought directly from HM Debt Management Office and from authorised agents, and are considered to be low-risk investments offering fixed returns. They are seen as stable and easily traceable assets.
- While purchasing shares is legal during a divorce, they are higher risk and subject to market fluctuations. Investments in volatile stocks could be scrutinised, especially if there is an intent to devalue or hide assets.
- Buying investment property is possible, but it could complicate matters. If done post-separation but pre-settlement, this asset will probably be included in the financial settlement, and it could lead to additional scrutiny.
What investments are risky to make during a divorce?
Certain investments are considered risky, not only because of financial volatility, but also because they may raise concerns during the financial settlement process. Here are some of the riskier investments to avoid during a divorce:
- Cryptocurrencies are highly volatile, with values fluctuating rapidly. Moreover, their relative anonymity can be perceived as an attempt to hide assets, which could lead to legal complications or accusations of non-disclosure.
- Investing in speculative or volatile stocks (e.g., tech start-ups) is risky because their values can plummet quickly. If this happens, it may be viewed as an attempt to reduce the overall value of the marital estate, which could negatively affect your standing in court.
- Purchasing property during divorce proceedings may seem like a good investment, but it can be risky. The court may scrutinise whether the investment was made to shield assets from the settlement.
- Attempting to move funds into offshore or private accounts can raise red flags. If the court suspects you are hiding assets, it can lead to penalties, a reduced settlement, or accusations of financial misconduct.
- Investing in art, jewellery, or collectibles is risky because of their subjective valuation. Courts often view such assets as attempts to hide wealth in physical forms that are hard to quantify.
Does it matter if the money is joint or in one spouse’s sole name? What if the money is gifted?
Whether the money is joint, belongs solely to one spouse, or has been gifted (e.g., from parents) can make a significant difference in a divorce.
Joint money
If the money is held in a joint account or considered joint marital assets, it will generally be treated as part of the overall marital estate during divorce proceedings. This means that both parties have a claim to it, and it will be subject to division based on factors like the length of the marriage, the couple’s financial needs, and their contributions (both financial and non-financial).
Sole funds
If the money belongs solely to one spouse, such as earnings from their job or personal investments, it may still be considered part of the matrimonial assets, particularly if it was acquired during the marriage. The court aims to divide assets fairly, so even if one spouse earned or controlled the money, the other spouse could have a claim to it depending on the circumstances, such as whether they contributed to the family in non-financial ways such as being the primary carer of the children and home.
Gifted money
Money gifted from parents or other family members can complicate things. While gifts are sometimes treated as personal property and excluded from the matrimonial pot, this is not guaranteed. If the money was gifted to both spouses or used for joint purposes, for example used for buying a family home, it may be treated as a marital asset. On the other hand, if the money was clearly intended for only one spouse and kept separate, the court may exclude it from the division, although this depends on the facts of the case.
It is essential to provide clear documentation of how gifted money was used and whether it was meant for both spouses or just one. Ultimately, the court will focus on fairness and the needs of both parties when deciding how to treat gifted or individually owned assets.
Is there a right way to invest that is transparent and doesn’t look like money being hidden?
There are ways to invest during a divorce that ensure transparency and avoid the appearance of hiding assets. Courts value full financial disclosure, and any actions that seem like an attempt to obscure or manipulate assets can negatively affect the outcome of the financial settlement.
Investments in offshore accounts, trusts, or obscure financial instruments can raise suspicions, even if you’re not attempting to hide assets. Keeping your investments straightforward—like in transparent, regulated markets—demonstrates good faith. Investing in assets like gilts, ISAs, or high-interest savings accounts are examples of simple, traceable options.
Whatever investment you make, keep detailed records of every transaction. If the funds come from a joint account or a gift, document the source, purpose, and current value of the investment. This ensures that the origin and status of the money are clear, reducing the chances of it being seen as an attempt to hide assets.
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