How to protect your finances in a divorce

Divorce and finances: steps to protect yourself

Divorce can have a substantial impact on your financial wellbeing, both in the short and long term. Taking proactive steps early in the process can help safeguard your assets and ensure a more stable financial future.

In this article, we provide practical guidance on protecting your finances during divorce, including the importance of full disclosure, formal legal agreements, and future planning.

Why financial planning during divorce is essential

Whether you are married or in a civil partnership, getting a divorce can have a significant impact on your finances. Financial planning will help you to maintain stability during and after your divorce and avoid unnecessary complications which can cause immense stress during uncertain times. Seeking legal advice as soon as possible can help ensure that all the financial aspects of your divorce are properly managed from the offset.

Identify and document your financial position

Prior to meeting with your lawyer, it would be helpful for you to prepare an overview of your joint and individual financial situation. This may include bank statements, payslips, tax returns, mortgage statements, pension details, investment accounts, and debts. Having a clear outline of your assets and liabilities will allow your lawyer to have a clear picture of the financial complexity of your case. It might benefit you to meet with a financial advisor prior to meeting with a lawyer so that you have a clear overview of your financial position from the beginning and a realistic budget for the future to help you rebuild your life after divorce.

Is it also important to disclose to your lawyer any pre-nuptial or post-nuptial agreement that is in place as these agreements could provide protection of assets and help to clarify ownership. There is also a legal obligation to do so as part of full and frank financial disclosure. Lack of transparency in asset disclosure can cause delays during financial proceedings. If one spouse withholds information about hidden assets, it can lead to a prolonged and difficult divorce process. The Court treats non-disclosure very seriously and could impose consequences on the guilty party if this is brought to light during proceedings. Please see our blog “Undisclosed assets in divorce” for more information on this topic.

Assess joint vs. Individual assets

The first step when dealing with the financial aspect of your divorce is to determine which assets are joint and individual assets. Joint assets are usually those acquired during the marriage, for example the family home, savings, and pensions. Individual assets often refer to property owned by one spouse before the marriage or assets received as gifts or inheritance. Despite this, the court has broad discretion to treat certain assets as joint if it is deemed as fair, even if the asset is solely owned by one spouse. This is often to meet the needs of the family, ensuring the division of assets is equitable and reflects contributions made during the relationship.

The Court considers numerous factors when working out how to divide assets in a divorce. Although each financial case is unique, the Matrimonial Causes Act 1973 provides a framework specifying what courts must assess such as the welfare and needs of children, the financial needs of each spouse, the current and future earning potential of both spouses, contributions made, the length of the marriage, age/health and the standard of living during the relationship.

Take immediate protective measures

As explained above, seeking legal advice as soon as possible can help ensure that all the financial aspects of your divorce are properly managed from the offset. Please see below things that you can do yourself which will assist in managing and protecting your finances: –

1. Contact your mortgage provider – if you own a property a property together, depending on who’s name is on the mortgage, you may need to contact your mortgage provider to make them aware of your financial situation and discuss how is best to manage the mortgage payments while the financial aspect of your divorce is being sorted. If you have a joint mortgage and don’t keep up your mortgage payments, this could negatively impact both spouses credit rating.
2. Contact your bank, credit card and loan providers – if you have joint accounts or loans with your spouse and your divorce isn’t working out amicably, you may want to ask your bank/loan provider if they can change the way the account is set up meaning both account holders need to give consent for money being withdrawn.
3. Protecting other financial assets – your lawyer would be able to advice you on Court Applications which can be made to prevent your spouse from selling, transferring or getting rid of any assets intentionally during your divorce.

The importance of a financial order – clean break vs. Ongoing financial obligations

A financial consent order is a legally binding document which formalises financial agreements after divorce. Its purpose is to ensure both parties have a clear understanding of their financial obligations and be enforced if in the event that either party breaches a term set out in the order. The order provides clarification on how assets, debts and income will be divided and protects both parties against future financial claims being made.

In summary, a clean break financial order ends all financial ties between divorcing spouses, preventing any future claims such as spousal maintenance, property, or pensions.

In contrast, an order with ongoing financial obligations includes continued payments often for a set term known as spousal maintenance if there is a significant income disparity or needs financial assistance post-divorce. This type of order can allow for future claims, changes and flexibility.

A clean break provides finality and financial independence, while ongoing obligations maintain financial links between ex-spouses. Please note that child maintenance is dealt with separately in both cases.

Update your will and beneficiaries

If you are going through a divorce, you must consider what would happen to estate upon your death. If you have made a Will, it could well be that the main beneficiary is your spouse.  Unless you are happy for that to remain the position then you need to change your Will to reflect your current wishes. Your family lawyer will be able to refer you to our Wills, Trusts and Probate experts who will be able to assist you with this.

Specialist Family solicitors

Get in touch with our Family Law experts today to protect your financial future through divorce, contact the team on 01202 525333.