The number of divorces is falling – except among the over-50s. The number of men over 55 and women over 50 who divorced rose in the four years from 2013 to 2017. Perhaps as the hair lightens, marriage weighs heavier.
If you are heading for a silver divorce, can you make sure that two individuals can live as comfortably as one couple did? Probably not. You will need two fridges not one, two televisions, two beds, perhaps two cars. And, of course, two places to live. That is all very hard to pay for from the same, perhaps very unequal, incomes.
Rule 1 Avoid court
Although every divorce has to be granted by a judge, conflict in court is unnecessary and expensive. Legal fees and rent while couples argue will eat away at the assets to be shared. Judges will usually accept agreements that have been arrived at by consent unless they feel one party is being exploited. Every divorce is now normally preceded by mediation. This is not the same as reconciliation – trying to get couples back together – rather it is trying to reach agreement on a fair deal concerning finances or children.
Avoiding conflict will leave more – perhaps a lot more – to share. Remember, though, that either partner can empty a joint bank account and both are fully liable for joint debts.
Rule 2 Know how it works
If a marriage ends in England and Wales, or in Northern Ireland, the starting point is that everything the two people owned is split down the middle. That applies to money, property and possessions. It applies regardless of who bought what – before or after the marriage – how much each earned, or who owns any savings or investments. It recognises that if one partner worked and the other did not, or earned a lot less, they still brought other things to the marriage which are counted equally. Only in rare circumstances is this rule broken. Dependent children can make things less clear, but in silver divorces they are much rarer.
In Scotland, the law provides for ‘fair’ division of property and it is normally only property acquired during the marriage that is split. For example, if one party inherits £100,000 during the marriage that will not be counted as common property whereas in the rest of the UK it would be.
In Northern Ireland, income inequalities can be reduced by a period of regular maintenance from the better-off partner to the other.
The same rules apply no matter why the divorce happened. Divorces now are ‘no fault’ – one can only be granted where the marriage has irretrievably broken down. The most commonly stated reason is that one or other behaved unreasonably. Adultery is another reason (except for civil partners or same-sex spouses, where unreasonable behaviour is normally used).
How to split your finances in a divorce
Divorces can also go ahead after two years’ separation with consent of the other party or after five years’ separation without consent. In Scotland, if there are no children under 16 and no financial issues there is a simplified procedure for separation after one or two years.
The behaviour of the spouses will not normally affect property division. A home is often the largest asset. Regardless of who paid for it or who owns it, the value (after deducting any mortgage) will usually be split fifty-fifty, though that may not always be so in Scotland. Splitting the value of the home can mean that both parties have to live somewhere not so big or not so nice.
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Rule 3 Remember your pension
Many people forget that after their home, their pension could be their biggest asset. There are two types of pension. One that pays out at a certain age as a percentage of salary is called a Defined Benefit pension or simply DB. Money that is saved up in a personal pension pot or a SIPP is a Defined Contribution pension or DC. Many company schemes are now DC.
A DC pension should be valued to get a Cash Equivalent Transfer Value (CETV). On divorce, a share of that value would normally be transferred from one party to a pension in the other’s name.
With a DB pension there are two common ways to share it. ‘Earmarking’ means the other spouse can get a proportion of a pension already in payment or at pension age, and their share will survive the death of the other partner. Alternatively, the value can be split like a DC pension, using a CETV. However, pensions in the public sector, such as the police, are particularly valuable with a variety of other benefits and always require specialist advice from an actuary.
Pension rights can be offset against other rights. For example, one party might get more of the house in exchange for the other keeping more of the pension. It is possible that a small part of a state pension can be split too. Those rules are complex.
In Scotland, only the pension built up during the marriage counts as an asset to be split. You should always get legal advice on pensions.
For more info, go to the Money Advice Service and search for ‘dividing pensions on divorce’.
Rule 4 Take care with pre-nups
Pre-nuptial agreements that have been signed before a marriage, about who will get what if the marriage ends, are not legally binding, nor are agreements made during the marriage.
However, the court will usually accept one if both parties had separate legal advice and disclosed their finances fully, as long as there was no duress and the outcome is fair.
How to protect your finances in a divorce
Rule 5 Move on
In a divorce, there may be anger and bitterness. Never consider that when things are being divided. Never argue about who gets what just to make a point. Try to settle as soon as possible, preferably with mediation. Breathe. And move on.
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