‘No fault’ divorce has made splitting up simpler and speedier since it was introduced a few years ago.
Couples can get divorced within six months of first applying and the process is largely online.
However, financial settlements are still dealt with in a separate and parallel process, which can continue long after the divorce is final.
The New Year is often when couples get divorce proceedings under way, after spending an unhappy festive season together.
However, one lawyer tells us it is ‘a complete fallacy’ that January is the busiest time for divorce.
‘While there is a slight uptick in activity in January, we put this down to December being quieter because of the festive season,’ says Simon Bassett of RWK Goodman, who has more than 30 years’ experience in family law.
Last week, money expert Sarah Coles of Hargreaves Lansdown explained how to get your finances in order when you start a divorce.
Today, we run down divorce tips from experts on a vast array of topics, from keeping down costs, to whether to sell the family home, to avoiding a tax bill when you transfer assets.
Bassett also offers some advice borne of his long experience of helping clients through the process.
Scroll down to read his dos and don’ts – including building a support network to help you make better decisions, and NOT emailing your solicitor every time you have a heated exchange with your ex.
Early advice
‘Sorting out your finances on divorce can be complicated and mistakes costly,’ says Liza Gatrell, a managing partner at Stowe Family Law.
‘Making wrong or ill-advised decisions now can have far-reaching effects, be potentially permanent, and prevent you from moving forward or having financial stability in the future.
‘Get as much legal and financial advice as possible early on, so you have a full understanding of your finances and legal rights.’
DIY and ‘quickie’ divorces
Simon Bassett, who heads the family team at RWK Goodman, says while it is possible to file a divorce without any professional help, this can cost you in the long run.
‘You may overlook important financial assets. You may have a claim to your ex’s pension for instance. If assets are not split fairly, you could be left in financial peril in later years.
‘Trying to recoup anything which was overlooked post-divorce could prove very difficult and incur the legal fees you tried to avoid in the first place (if not more).’
Bassett adds that ‘quickie divorce’ is a phrase often touted in the media, but explains: ‘It takes a minimum of six to eight months from start to finish and often can take considerably longer.’
Gatrell also warns of the pitfalls of DIY divorces, saying: ‘Whilst the online divorce application forms are easy to find online, they are not so simple to complete.
‘Incorrect or unknown information at this stage can cause issues later in proceedings and leave people open to future issues and costs to correct any errors.’
Financial settlements
‘A common misconception is that getting a divorce automatically severs your financial ties with your spouse. However, this is not the case,’ says Gatrell.
‘In fact, if a couple does not legally separate their finances through a court order, they can make future claims against each other even if the divorce is finalised and they separated years ago.
‘This leaves people vulnerable and open to financial claims long after the marriage has ended. A financial order is a separate application to the divorce itself and provides people with a clean break and helps protect them.’
No fault divorces might help more couples avoid costly legal exchanges over the separation itself, but you should avoid the temptation to ‘go DIY’ over the financial settlement, says Evelyn Partners’ head of family and divorce Ben Glassman.
‘The biggest legal bills occur when there is a dispute over the financial settlement, which is a separate matter to the divorce itself, and can often drag on much longer.
‘An agreement over the splitting of assets that is arrived at amicably, and preferably at an early stage, is important if both parties want to minimise stress and expense.’
He says living as a couple is usually cheaper and more financially secure than living alone, and marriage carries many tax advantages, so those embarking on life as a single person can experience something of a financial shock.
‘In reaching a financial agreement, a court usually considers a 50:50 split as a starting point for a long marriage of more than five years as set out in the Matrimonial Causes Act 1973. This will cover property, pensions, savings and any child maintenance,’ he says.
Keeping costs down
‘Certain costs such as court fees in divorce are set and will need to be covered.’ says Gatrell.
‘However, there are several ways of working that can help reduce the time it takes. Being organised with all your paperwork will help reduce any admin costs.
‘Sign and return documents as soon as possible to avoid unnecessary time chasing you, and collate all your questions and issues into one email or phone call to avoid multiple smaller conversations.’
She adds that while legal advice is important, for some people it is not an option to instruct a solicitor to manage the whole case.
‘In these situations, I always advise clients to get any legal advice they can afford to look at the finances, even if it is just one meeting to understand entitlement and implications.
‘Failing that, there is minimal Legal Aid available, and a number of charities and free legal clinics can also help. Most law firms also offer a free 30-minute consultation, so people can at least get some of the basics.’
Simon Bassett, of RWK Goodman, says: ‘If you can maintain a relationship with your ex, there is no reason why a divorce should be expensive.
‘They become expensive when couples refuse to negotiate and drag things out.
‘Lengthy divorces which go to court will be considerably more expensive than amicable ones which use non-court methods such as mediation to agree financial and children matters.’
Family home
‘Property is usually the biggest asset, and if one partner wants to stay in the family home, they will often have to forgo the majority of the other assets such as savings and pensions,’ says Glassman.
‘One spouse often wants to hang on to the family home when getting divorced, especially where children are involved.’
But he warns this doesn’t always make financial sense when taken into context with other assets, because the property you live in doesn’t produce an income and parts of it can’t be sold to meet spending.
Glassman also notes that higher mortgage rates have narrowed the options for those who need to borrow to buy a new home.
He explains that while one spouse remaining in the family home will avoid some legal, mortgage and property transaction fees, the spouse who stays usually has to buy the other’s share of equity, and if they can’t draw on other assets the mortgage rate environment could make it difficult.
Meanwhile, older borrowers might find lenders less willing to extend the loan term beyond 20 or 25 years, or into retirement, says Glassman.
‘If there is no option but to sell the home, this could also mean having to pay an early repayment charge if the mortgage was fixed.
‘However, it is often feasible for one party to port an existing fixed mortgage and some lenders even allow couples to split and port a fixed rate loan.’
Children
It is a myth that the mother gets custody of the children, says Simon Bassett.
‘Family lawyers and the courts no longer use the word custody, preferring instead to refer to children arrangements. The focus is very much on ensuring that children maintain a relationship with both their parents if possible and spend time with each of them.
‘Therefore, you cannot take your children and move to another part of the country or abroad without your ex’s consent. If he doesn’t agree, the matter will be decided by the family court.
Got a tax question?
Heather Rogers, founder and owner of Aston Accountancy, is This is Money’s tax columnist.
She can answer your questions on any tax topic – tax codes, inheritance tax, income tax, capital gains tax, and much more.
You can write to Heather at taxquestions@thisismoney.co.uk.
Pensions
Pensions are often neglected in divorce settlements despite their value to both partners as a joint asset in a marriage.
This is Money has a guide to the three main options on splitting pensions in a divorce, and the many problems to avoid.
Liza Gatrell, of Stowe Family Law, says: ‘One of the most common financial mistakes in divorce is to ignore or forsake pensions.
‘Often seen as complicated and difficult to value, many people using a DIY approach to their divorce skip past them and focus on assets such as the family home. However, this can have a considerable impact on long-term financial security.
‘Pensions are often one of the biggest assets in the marriage. Avoid them at your peril.’
Clare Moffat, pensions expert at Royal London, says: ‘The fairest way to deal with pensions is something called pension sharing.’
‘This means that the pension is divided. This might not be 50/50, it depends on the other assets too and whether there are any children to support. The needs of children are prioritised. Sharing ends up with both people owning part of the pension.’
She says this requires a court order and it can take more time which means extra cost, but it could be well worth it in years to come.
‘This is especially true for people in the public sector – where there are an estimated six million employees who will still have those defined benefit pensions, the value of which is not always understood.
‘A £100,000 defined contribution scheme pension and a £100,000 public sector pension are not equivalent because the public sector pension is making a promise to pay out until you die.
‘A defined contribution pension is a pot of money, and it is up to the person to decide what they do with it.’
Glassman says: ‘When a couple are closer to retirement, pension pots are likely to be at their greatest value, and the issue can become contentious when, as is often the case, one spouse (typically the male) holds the majority of pension wealth.
‘There are various ways of splitting pension assets, but the important thing is to have it on the radar and make sure pensions are valued properly and an informed agreement is arrived at before the financial settlement – a process that can often require financial advice.
‘Once the court order is made, it is extremely difficult to alter the settlement.’
Glassman warns not to neglect state pensions, because women especially often have gaps in their career which could affect their record, so it’s important to get a state pension forecast particularly when looking to equalise the pension entitlement of spouses.
‘The value of a guaranteed income inflation-linked from age 66 (currently) until death is not to be underestimated,’ he notes.
He also suggests looking into new rules on pension pots forming part of an estate for inheritance tax purposes from April 2027 onwards, because it might change preferences over how assets are split among the two parties in a divorce.
Financial advice
‘Taking financial advice is crucial,’ says Clare Moffat of Royal London ‘This might seem like another cost at an expensive time, but financial advisers understand pensions.
‘When couples are much younger, have no children and have only been married briefly then a low-cost DIY divorce might be a good idea. But as soon as there are more assets and public sector pensions are involved then financial advice is key and will mean better outcomes.’
Glassman says: ‘Even where couples are truly amicable and wish to ensure their wealth is split in the fairest and most tax-advantageous manner, involving a financial planner can save substantial amounts of money.
‘This is particularly true where there are significant pension assets involved. The new proposed rules on pensions and inheritance tax from 2027 make sound advice even more important.
‘Independent financial assessments can benefit both the divorcing parties, achieve clarity around the real value of the couple’s matrimonial estate, and shape the divorce settlement to achieve an optimal outcome for the long-term.’
Capital gains tax
‘Transfer of assets between spouses takes place on a “no gain, no loss” basis for capital gains tax purposes,’ says Glassman.
‘No tax is crystallised on the transfer, with the receiving spouse effectively taking the other spouse’s base cost.
‘This rule for spouses used to apply only up to the end of the tax year of permanent separation.
‘Since 6 April 2023 this treatment is available for up to three tax years after the end of the tax-year of separation – or for an unlimited time when the assets are transferred as part of a formal divorce agreement.’
He says a spouse who retains a share in the family home will be able to claim relief from CGT on any profits if the home is sold to a third party, if they have already bought another home.
But Glassman warns possible CGT pitfalls remain, because while the spouse rules work on a “no gain, no loss” basis, they do not extinguish the inherent gain within the asset – and spouses therefore need to understand the “net of tax” position.
Death
Glassman says you should update your will immediately, consider putting in place power of attorney in case you become incapacitated before the divorce is granted, and change your expression of wishes or death benefit nomination form with each of your pension providers and your employer.
The do’s and don’ts of divorce
Simon Bassett, head of the family team at RWK Goodman, has decades of experience advising clients on divorce. He shares his tips below.
What to do during a divorce…
Focus on your long-term goal: Your happiness and the children’s happiness.
Build a support network: Divorce can be a daunting process so build a support network of trusted family members and friends and consider using a therapist or divorce coach. We find that our clients who have good support make better decisions and are less likely to procrastinate.
Choose your solicitor carefully: Like any working relationship, you need to find someone you can work with and build a rapport with. Seek recommendations from friends and colleagues and if the fit doesn’t feel right, find another.
Try to keep the divorce amicable and out of court: Use non-court methods such as mediation. Not only will this be better for your children and your own emotional health, it will also save you money in legal fees and speed up the process.
Sort out your paperwork: If you have your finances in order, for example details of all your expenditure, income and pensions, this will save you masses in divorce fees.
Be grateful for what you had: The end of a relationship should not be viewed as a failure. Some relationships simply run their course so be grateful for what you had, for example there were many years of good times and what the marriage produced, the children.
…And what not to do
– Delay things. Things may get messy but it will get better
– Look back and focus on what went wrong
– Compare your divorce to other people’s – every divorce is different
– Ignore your solicitor – if they recommend something, it will be based on many years’ experience and the advice will be specific to you and designed to achieve the best possible outcome
– Email your solicitor every time you have a heated exchange with your ex
– Be greedy, because the courts take a very dim view of people who exaggerate what they may need post-divorce
– No matter how tiresome your ex is, don’t ever be negative about him or her in front of the children. Remember that you are your children’s role model.
