Common financial mistakes to avoid during your divorce

By Jones Myers Partner Nicki Mitchell – Mediator, Child Inclusive Mediator and Collaborative Family Lawyer

The fear of starting all over again and all the financial worry that can bring with it can understandably have a profound effect on many people going through divorce or separation.

This anxiety can be particularly acute for those who have not had to deal with financial practicalities such as tax, standing orders and direct debits during their relationship.  

Below are some insights to help you stay on the right financial track.

Be Open and Honest

Not sharing financial information during a relationship can contribute to problems during divorce proceedings. 

One spouse may have no idea where the budget line is – or even where it should be drawn – and may have unrealistic expectations of what they are entitled to, or what is a realistic and affordable. 

One spouse may have hidden savings or income from the other or scrutinised the other’s spending without being transparent about their own. On divorce, there is nowhere to hide. It is fundamental that both spouses fully and frankly disclose everything they have to each other as a starting point for an informed negotiation.

The Importance of Financial Disclosure   

In every divorce, separating couples must provide to the other full details of their assets, income, pension and liabilities. This is known as financial disclosure.

Financial disclosure ensures that both spouses can make fully informed decisions about what they consider to be a fair settlement. A failure to disclose anything material to the settlement can in some cases lead to an agreement being set aside. Lawyers and judges know every trick in the book and will ask questions if they suspect that money has been concealed. They may even employ forensic accountants to track down missing assets.

Don’t be tempted to hide money in offshore banks. These still have to be disclosed.  If you do not provide everything that is necessary to understand the financial position, family courts have the power to question your accountant, your financial advisor and even your bank manager.

Setting up a new business shortly before separation may well be seen as suspicious or even a deliberate attempt to hide assets. Taking steps designed to put money beyond the reach of your spouse could lead to injunctions being made against you, freezing assets, or ordering the return of monies from third parties.  In the long run, actions such as these are highly unlikely to succeed and will almost certainly damage your credibility in the eyes of the court.

The Penalties of Concealing Assets

If it later comes to light that you have withheld material financial information during the financial disclosure process, your spouse might be able to ask the court to set aside the Financial Consent Order and relook at what would be a fair order – taking into account all the assets, including those not previously disclosed.

The court can also make an order that you pay your ex’s legal costs. In the worst-case scenario, deliberately withholding financial information in breach of a court order can amount to a contempt of court for which a range of penalties (including ultimately imprisonment) could be imposed.  

Include Pensions in Financial Settlements

Frequently overlooked in financial settlements, pensions are frequently one of the most valuable assets of a marriage. They often make up the second highest- value asset in a divorce settlement after the family home – or sometimes the highest.

It is key that information about pensions is made available in the financial disclosure process which must include details of all pensions, including state pensions – and the value of each one.

Pension sharing, the most common way in which a disparity in pensions is addressed in a divorce settlement, splits the pensions immediately and provides a clean break

As an alternative, in some cases ex-spouses prefer to take a greater share of the equity in the family home or other capital, as a trade-off for a share of the other’s pension.

Some divorces may involve several pension arrangements so it is important to consider which arrangements should be shared, and to what extent.  Pensions are complex and, save in very straightforward cases with pensions of limited value, it is important to get specialist advice about them before agreeing a settlement. 

The pension share may be internal (when the recipient becomes a member of the scheme) or external when the share must be invested in an existing or new arrangement of the receiving party. Care should be taken to obtain details of the cost of any transfer.

In deciding what is best for them, the couple need to consider how their respective financial needs will be met and what other assets are available for distribution.

As part of our holistic approach, Jones Myers advises and guides our clients through the stages of divorce during and after their divorce.

Part 2 of this article will include how financial planning can prove useful, the importance of a formal Financial Order – and how to plan for your finances post-divorce.    

This article was originally commissioned for, and published in, The Divorce Magazine.

Image courtesy of Unseen Studio on Unsplash

For queries on pensions in divorce or any aspect of family law, call 0113 246 0055 (Leeds) 01423 276104 (Harrogate), 01904 202550 (York). Visit www.jonesmyers.co.uk, email info@jonesmyers.co.uk or tweet @helpwithdivorce

Jones Myers blog is ranked among the UK’s Best 25 family law blogs and websites to follow in 2025