Navigating the emotional and logistical aspects of a separation is undoubtedly challenging. But the financial component adds another layer of complexity, often amplifying tensions. Understanding how to ease the financial path during this time can significantly reduce stress and ensure both you and your ex-spouse find a fair and sustainable way forward.
It’s natural for emotions to run high during a separation. However, open and honest communication about finances is essential. Do your best to leave “one upmanship” outside the room, and instead focus on the current situation and how to handle joint responsibilities and assets.
This might seem obvious and in truth, it usually is to most separating couples. But sometimes individuals lose sight of what is most important as they get caught up in achieving their own best outcome. If children are involved, prioritise their needs. This might mean setting aside funds for their education or ensuring they have stable housing. Remember, child support is not a punishment or reward but is about providing for the child.
There’s no avoiding the difficult areas of dividing up the assets, maintenance payments and agreeing the ongoing repayment of debt need to be tackled. Having a financial planner involved in this process is very valuable, as they will approach the task in hand without emotion. Our job is simply to achieve the very best outcome in relation to the financial issues that will inevitably arise.
Sometimes a potential solution such as selling a family home in order to buy two smaller homes needs to be voiced, but often it is difficult for both parties to agree this themselves. Decide on a division of assets that’s equitable. Remember, equitable doesn’t necessarily mean equal. Factors like who primarily uses the asset or who might need it more (for example, a primary caregiver might need the family car) should be considered. Having a voice of reason can save a lot of time, expense and additional heartache.
Make sure the correct life cover is put in place to secure maintenance payments in the event of death. Seek advice as to the type of policy and the beneficiary profile, in order to reduce the Capital Acquisitions Tax (CAT) liability on receipt of the benefit.
If you are the recipient of maintenance payments, it is also important to ensure your ex-spouse has adequate income protection cover should he/she be unable to work because of illness or injury. Also ensure that you retain any health insurance cover, as lapses in cover can lead to increased cost or indeed reduced coverage down the road.
Pensions are complex at the best of times. On divorce they become even more complicated. A Pension Adjustment Order (PAO) entitles you to a share of your ex-spouse’s pension fund, but there are different ways that these can be established. The benefits for both parties can remain in the pension scheme until the pension scheme member retires, or instead the non-member can transfer their share of the assets to their own arrangement. We’ll help you identify what’s the right approach for you.
Both parties should create individual budgets. This will help in understanding immediate and future needs and ensuring that expenses like mortgage payments, utilities, and childcare are accounted for. It’s also an opportunity to identify areas of potential savings.
Don’t forget to take care of your emotional and mental well-being and encourage your ex to do so too. This isn’t directly a financial tip, but stress can lead to impulsive or poor financial decisions. Consider counselling or support groups, and ensure you have a personal support network to lean on.
By focusing on the practicalities and ensuring decisions are equitable and fair, both parties can transition to their next life chapter with greater security and peace of mind.
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