When divorce is mentioned the common reaction is that it is mainly a legal matter and legal advice, quite properly, is sought out. But this is just the start. Experts are then arranged by the legal adviser usually in the area of childcare (if relevant) but most likely in pension assessment and or financial analysis. This means that the role of a financial adviser during a divorce becomes more central than what many people might normally think of, and that’s where we come in. Common Financial divorce mistakes don’t have to be common. In all our years of helping clients the sort of issues that tend to arise include:
Dealing with emotions
- Letting emotions override what should be sensible decisions in order to have one-upmanship. In our experience this this not only tends to prolong legal proceedings but also increase legal fees.
- Becoming emotionally attached to assets during negotiations. From a legal perspective, the Family Law Court is only interested in an equitable distribution of wealth.
- Not taking a stand for what is rightfully theirs. Some parents and ex-spouses are more conscious of being supportive and sensitive to the needs of others and even being more than fair to their former spouse. In so doing they overlook their own personal needs, now and into the future.
- Failing to engage a professional financial adviser early enough in the Divorce process to evaluate the financial consequences of any possible decisions that might be taken.
- Forgetting to update Wills and Enduring Powers of Attorney.
- Not developing a post-divorce financial plan to help transition from a married to single status by prioritising new personal goals together with the financial consequences that go with them.
- Loss of personal accommodation when a family home becomes involved as an integral asset for one party to the exclusion of the other.
- Underestimating the immediate expenses of divorce – such as legal expenses for both sides of usually solicitors and barristers, increases in childcare, separate vehicles as well as doubling of homes and household expenses.
- Non-disclosure of assets by one party. Sometimes this may be a simple oversight but quite often we find that it can be a deliberate ploy in order to hide wealth.
Taxation and Benefits
- Failing to assess the taxation implications of their proposed divorce settlement. Acceptance of one asset value in place of another may have an unintended consequence as different taxation treatments may apply to income drawdown or gains.
- Failing to consider an ex-spouse’s eligibility for social welfare benefits.
Long Term considerations
- Underestimating future living expenses for the years to come and in retirement.
- Underestimating the long-term impact of inflation on expenses especially if the Divorce happens when someone is aged 50 or less. Where, say, long term inflation was inflation rate is 3% prices will double in 24 years.
When Common Financial Divorce Mistakes can be avoided, its something worth pursuing. Contact us today on 01-8455827 to discuss your own situation in more detail.
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