I support women emotionally going through the harrowing time of divorce through my workshops, 1-2-1 personal coaching calls or group sessions but one area that is foremost on their mind and keeps them tossing and turning at night is how to handle their finances.
Here is an article from an old school friend of mine Mary Waring – who specialises in empowering women going through a divorce.
‘If your husband has dealt with the family finances during the period of your marriage then it’s very likely that during the divorce negotiations you can feel fearful and overwhelmed when looking at the financial issues. It’s too easy to bury your head in the sand, since you may feel you don’t have the emotional capacity to deal with anything else.
But you’ll only get the one chance to agree your divorce settlement. So make sure you fully understand all the relevant issues and what this will mean for you in the long term. It’s only at this stage that you will be able to make the right decisions and choices for your future.
To help you understand some of the issues around finances I’ve noted below the myths often incorrectly believed. Having a greater understanding of these will help you on your way to tackling the financial decisions you need to make.
Myth: You aren’t entitled to a fair share of the assets
Don’t assume that if you have earned less than your husband that this will impact on your settlement. Women often earn less; either because they are a stay at home mum, maybe the family finances don’t require them to work, or they do a lower paid/part time role due to child care issues.
Frequently women believe that if they haven’t contributed financially to the marriage that they will be entitled to a lower share of the joint assets on divorce.
However, this is incorrect. The court will base the settlement on the financial needs of both parties, especially the one looking after the children.
If it’s a short marriage, typically you go will leave the marriage with what you bring in. But in a longer marriage all assets (and infact all debt) are pooled and the aim is to divide equally, as much as possible. This is regardless of who owns which assets.
Myth: Your husband will be financially penalised
Do not assume that if your husband wants to end the marriage, or maybe his affair was the reason for the divorce, that the law will in any way punish him financially to your benefit. I often hear women saying “I want him to pay” for what he’s done.
But the law is not there to punish one or other spouse. Its aim is to split the available assets according to each parties needs. The court does not consider moral right or wrong:
If your husband has left the marital home, he will need to be rehoused. If there are children to the marriage he will need an appropriate sized property so that there is sufficient room for the children to stay when they spend time with him.
Myth: You will always be able to maintain the same lifestyle after divorce
Following divorce it’s very likely you will want to maintain the same lifestyle as you enjoyed during your marriage.
If there are sufficient funds to go round that’s likely to be the outcome. However, consider what will happen if there isn’t enough money. The same income that was being used to support one household during the marriage will now be used to support 2 households following divorce.
On this basis, maintaining the same lifestyle just may not be possible.
You must consider the joint finances. If there is not sufficient money for you to stay in the family home, the law will not uphold your request.
Listen to what your family solicitor advises you will be an appropriate outcome. They have years of experience and can predict the likely outcome with some confidence.
Work closely with your financial adviser to see if it is possible to stay in the family home. Look at the various options, budgets, and what it is you can afford.
Myth: Keeping the family home is the best option
My experience is that frequently the wife wants to stay in the family home and the husband wants to keep his pension intact. He views the pension as “his” money compensating him for the hours he’s put in at the office.
Staying in the family home can often be an easier option for the wife. In a period of extreme upheaval and uncertainty it can be really comforting to have some stability. It causes the least disruption and upheaval for the wife and the children.
However, before you decide this is the outcome you want, you must consider the wider implications of being awarded the home and therefore potentially receiving no pension share.
Consider what income you will live on when you retire, especially if maintenance will cease at retirement age. There is always an option to downsize at a later stage, but do you know whether that will realise sufficient funds?
Myth: Thinking you are a “common law wife
Frequently women who are co-habiting with their partner and not married (or not in a same sex civil partnership), think they have the same protection as a wife.
Although we often hear the term “common law wife”, there is infact no such thing in law.
It is a widely held belief among women that if you are cohabiting but not married that you will have the same rights as a spouse. However, this is a myth, and this is the case regardless of the period of time you have been living together and even when you have children.
Following separation your partner will need to provide financially for the children. However, there is no legal requirement for him to provide for you or provide a share of the wealth created during your relationship.
What should you do?
Getting to grips with finances during this very difficult and emotional time will often be challenging. But you only have this one chance to get the right settlement for you and your children. Work closely with your professional advisers to ensure you understand the implications of each of the financial options and you choose the one that’s right you.
Finance can sound very daunting, but work with an adviser who can explain it all to you, in down to earth language without jargon. Understand what lifestyle you can afford after the divorce. The financial settlement on its own means very little. It’s the lifestyle it can buy you which is relevant.
About the Author:
Mary Waring is an independent financial adviser and the founder of Wealth for Women, www.wealth-for-women.co.uk specialising in financial advice to women going through divorce. She is both a Chartered Financial Planner and a Chartered Accountant, being one of only a handful of advisers in the whole for the UK with this high level of qualification.
Mary is passionate about changing the way women think about finance. Too many women stick their head in the sand and ignore it, or rely on a man to sort it for them. Mary is also author of ‘The Wealthy Woman – a man is not a financial plan’. http://amzn.to/1jh21Bn.