When it comes to protecting your assets during divorce, the best strategy is to be prepared. Divorce can affect personal finances from dividing matrimonial assets and property to future maintenance and savings. Here, we take you through everything you need to know about preparing your finances before divorce.
When it comes to protecting your assets during divorce, the best strategy is to be prepared. Divorce can affect personal finances from dividing matrimonial assets and property to future maintenance and savings. Here, we take you through everything you need to know about preparing your finances before divorce.
If you have a family law issue and you require legal advice to understand your options, contact specialist family law solicitor Liza Gatrell. Vicki is a trusted and highly capable family lawyer and divorce solicitor and a Partner at the specialist family law firm, Stowe Family Law.
Protecting property
If the family home is in your spouse’s sole name, you will need to take some action to protect your rights to the property. If the home is registered at the Land Registry, your rights can be protected using a “matrimonial home rights notice”, or “home rights notice”.
If properties other than the family home are in your partner’s sole name, you can register unilateral notices against them to prevent your partner disposing of, or mortgaging, the property during the divorce proceedings. However, in order for the unilateral notice to be granted, you will need to prove your interest in the property.
Ring-fencing pre and post-marriage assets
If you want to protect pre-acquired non-matrimonial assets, you need to ringfence them throughout the marriage. The protection awarded to non-matrimonial assets is weakened if they have been used by either you or your spouse during the course of the marriage. This can include money you’ve withdrawn from a trust, or funds gained from other properties.
You should also be wary of using money from assets acquired after separation to support your spouse before the divorce is finalised. As with pre-acquired assets, doing so could provide them with some rights to these funds.
Loans
Financial gifts from parents have little protection when couples divorce. However, money given as a loan from a family member is much easier to protect. Although loans can protect family wealth during divorce, they can still be disputed. Your spouse may argue that the loan was actually a “soft loan” or gift, which was never intended to be repaid. If the court agrees, then the contribution will be factored into your final divorce settlement.
To prevent this happening, you will need a loan agreement setting out the total amount being lent, the reason for lending it, and the terms and conditions for repayment. The agreement should be signed by all parties at the time the money is lent.
Savings
Savings are generally considered a matrimonial asset, so they will be relevant when considering financial division. It may be possible to argue that savings should be excluded if they were built up outside the marriage. But this will be dealt with by the court on a case by case basis. Savings acquired before the marriage might be excluded from the settlement, with some being classed as a “windfall”, such as gifts or inheritance.
Dividing savings and investments requires careful thought, particularly as there are different tax implications as well as charges to consider. ISAs can only be held in one person’s name, so if you are splitting them on divorce, they will lose their tax benefits. ISA transfers can only be made to the same person or a partner in the event of death, but not divorce. In addition, tax rates and reliefs depend on individual circumstances and are subject to change. ISA rules can also change, too.
Other investments
Other tax efficient investments such as offshore bonds, or Venture Capital Trusts (VCT) are complex areas of financial planning, and during a divorce can become even more so. Like ISAs, the tax benefits of VCTs attach to one person, and if ownership is transferred to another, it becomes even more complicated. If you have any investments, then it is recommended you seek specialist financial advice.
How can I protect my pension?
You could consider engaging the services of a pensions specialist or pensions divorce expert to consider the value of your pension against that of your spouse. It may also be worth considering the proportion of your pension that accrued before you married in order to explore the possibility of excluding this from the divorce settlement.
Can I use trusts to protect my money during a divorce?
Trusts are often used to protect assets from being included in the matrimonial pot available for division during a divorce. Although family courts do not have investigatory powers like the police, they do have the ability to ask probing questions. Providing inadequate answers or deficient financial disclosure is likely to lead to the court drawing adverse inferences and settlements that eliminate the effect of the trust.
Genuine trusts are relatively transparent and appear fair and reasonable. When trusts are hard to justify and explain, the court naturally becomes suspicious, and may even compel trustees to provide an explanation.
Creating a trust under a false pretence in a bid to protect money in a divorce is likely to lead to adverse inferences being drawn. Even worthy trusts created at the last minute before divorce, which appear to have an honourable purpose, also risk this conclusion.
Taking documents
Whilst you are still living under the same roof as your soon-to-be-ex, you might be tempted to take or make copies of their financial documents. Taking documents without permission will reflect badly on you in court and won’t be admissible anyway. If you do legitimately come across financial information your ex has left lying around, then you can make notes as to its contents and provide this to your solicitor. But the documents should remain in situ.
How to get your finances divorce ready
The following suggestions may be useful if you are considering divorce and wish to get your finances divorce ready:
- Know what is in your name and know how to access it. This could be bank accounts, debts, credit cards or other investments.
- Speak with your spouse about what they have. Knowing where you and your spouse are financially gives you a clear picture of how you compare to each other.
- Have a comprehensive understanding of your income and expenses. Income isn’t limited to your salary, and should include everything you have coming in. This could be welfare benefits, interest on savings or even money you make from selling items online.
Have 12 months’ worth of bank statements for each account in your name/joint names, evidence of savings, liabilities, your last three payslips, pensions statements, and information about any businesses you own.
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The information on this website is to be considered a guide and is therefore not legal advice. You use this information with the understanding that Wiselaw does not accept liability for any direct or indirect losses as a result of anyone relying on or acting upon the information on this website. Whilst we endeavour to provide accurate information, Wiselaw does not accept liability for any errors or omissions on this website.
