How to avoid post-divorce financial blunders
After the death of a spouse, divorce rates as the second most stressful life event – with some couples compounding their post-divorce stress with a series of financial blunders.
At Jones Myers LLP, we stress the importance of parties having a clear understanding of life after divorce – particularly with regard to money matters if they are to avoid this added burden.
During the divorce process, parties are required to settle financial matters relating to the family home, maintenance, pensions, investments, savings and any business interests. The legal term for this is ‘Financial Remedies’, formally known as Ancillary Relief. However, matters can take a turn for the worse if those involved fail to take a realistic view of the health or otherwise of their finances after the split – or get sucked into spending money for the wrong reasons.
Our dedicated and caring team at Jones Myers has been dealing with divorce cases since I established the firm as the first of its kind in West Yorkshire to commit itself exclusively to family law in 1992. With around 130,000 marriages ending in divorce in each year, we always advise our clients to adopt a pragmatic approach.
Changes to personal cash flow and problems can arise from paying debts or from additional purchases made to boost self esteem or, where children are involved, to win their affection. The client’s financial position has changed and it’s necessary to adapt to the new situation.
Many people feel vulnerable after divorce so it’s vital that they don’t make emotionally-based financial decisions as these will only compound their position and bring more stress.
It’s important for our clients to be aware that becoming financially independent is not always straightforward. For example, there may be some money-related problems from their relationship to be dealt with for some time afterwards which could make it difficult at first to get their finances ship-shape.
Below are Jones Myers’ Seven “P”s to consider to lessen the financial burden after divorce.
1. Planning: Carry out a thorough audit of personal income and outgoings, perhaps with the benefit of independent financial advice.
2. Pragmatism: recognise that the standard of living to which you were previously accustomed might no longer be possible. Do not go into denial. Spend only within your new limits.
3. Pay back: look at who is responsible for paying debts after divorce. It may be appropriate to cancel any jointly-held debts, close all co-signed accounts and ensure that arrangements are in place for creditors to continue to be paid without interruption. You and your partner – whether from marriage or a civil partnership – are responsible for the whole amount of any overdraft on joint bank accounts and other joint loans regardless of who borrowed or spent the money or kept the item that the loan bought. If the other person does not pay up, the lender may look to you to meet the whole debt.
4. Pride can be costly: there might be a temptation to splash out on a new look but go easy on the retail therapy!
5. Pause the ‘revenge’ button: some spouses have been known to exact revenge by running up credit cards. The risk is that you might also be held responsible for paying it back.
6. Purchasing children’s affections: avoid attempting to out-do your ex when it comes to winning children’s affections. This sends the wrong message to children as well as affecting your finances. .
7. Purchasing a new lover’s romance: avoid splashing or getting involved in loans if you enter a new romance.
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