Divorcees are £150k worse off – ‘critical’ step to take to avoid losing money after split
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The financial cost of marriage breakdown has been conducted by Handelsbanken Wealth Management which has found that the average wealth of married affluent people is currently £780,405, compared to £629,826 for divorced people. It’s a huge gap of £150,579, but the good news is that there are some things Britons can do to avoid being worse off after divorce.
To measure the impact of divorce on Brits’ finances over the last 10 years, Handelsbanken Wealth and Asset Management analysed Government data on people with household wealth of more than £200,000.
The results show that there’s no denying that divorce has a financial impact on families according to Christine Ross, client director at the company.
She said: “Divorce has a huge impact on couples’ lives quite apart from the emotional impact and the effect on families, with people having to split their wealth and in many cases buy new homes.
“Finances are clearly a major part of divorce and the long-term impact on average wealth at more than £150,000 illustrates the need to think through the issues and where possible take advice from someone independent who can help support both people and find a financial solution which works for both.”
Speaking exclusively to Express.co.uk, Ms Ross shared some tips for anyone who is about to get divorced.
She added: “Aside from the emotional aspects of a divorce, many believe that their long-term financial plans will be devastated by the end of their marriage, and that they will not be able to get their finances back on track.
“This is not necessarily the case at all, but the longer-term outcome can depend heavily on the advice you take, and not only from a legal perspective.
“Indeed, a divorce probably presents one of the most important times in your life to obtain impartial financial advice, particularly in relation to borrowing, pensions and investments.”
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One of the best pieces of advice is for people to be realistic at the outset as an acrimonious and lengthy process is likely to be more costly.
Ms Ross explained: “Compromise is often the better solution, and should serve to keep the legal costs to a minimum.
“For many, the major asset will be the family home.
“Be realistic as to whether this should be sold, and if both parties can acquire individual suitable properties using the sale proceeds – it may be that one party would not qualify for a mortgage alone.”
To determine if one person would qualify for a mortgage, it’s best to speak to a mortgage adviser and get their advice before negotiations start.
In some circumstances, it makes more sense to keep hold of the home as both parties could benefit from the asset’s potential increase in value over time.
She added: “In the case of investments and pension arrangements, try to be pragmatic about who should have which assets.
“It is possible to divide the value of both occupational and personal pensions, but consider any additional costs that would be involved in this process.”
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Alternatively, a better option could be to use the ‘offset’ approach, where one takes the investment portfolio and the other keeps their pension of similar value.
Ms Ross explained: “However, tax implications also need to be considered – good financial advice is critical in this part of the process.
“Once your divorce is completed, do remember to make a new will. An existing will is invalidated on divorce, and you will want to ensure that your estate is eventually distributed amongst your chosen beneficiaries.
“You will also want to update your nominated beneficiaries in respect of any workplace life insurance scheme, and any occupational or personal pension benefits.”
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