The firm said that after some couples held it together for the sake of the family over the festive period, New Year is a popular time to start divorce proceedings.
There were 107,599 divorces in 2019 in England and Wales, up 18.4% from 2018, according to the firm.
Professional advice is key, according to Menna Cule, financial planner at the wealth manager.
“Managing a divorce can be an emotional rollercoaster but with some smart advice at least the financial impact can be minimised, and future income needs protecting.
“If you and your spouse can agree on what is a fair split, possibly with the help of mediation, court proceedings may be avoided. However, sometimes there is no alternative and the court will need to intervene.”
Cule added that if clients find themselves in this situation, they should take control and ensure a fair deal by seeking advice immediately.
“You need to know what you are fighting for. Put money aside to seek legal and separate financial advice immediately”, she recommends.
“Then, when you are ready to visit your solicitor, a financial adviser can help you draw up a list of joint and personal assets and valuations, so any advice you seek is based on accurate information. And this can make the appointment with the solicitor more time and cost-effective.”
“Draw up a list of assets,” she continued. “A financial adviser will then be able to look under the bonnet of your financial situation more forensically and give more accurate advice.”
Cancelling any financial commitments that might be in a joint name immediately is another important step, according to Cule. “The more unscrupulous partner could take advantage otherwise and saddle you with debt you are liable for. So cancel credit cards, joint accounts, personal loans and even overdrafts if possible and set up afresh in your own name.”
Timing is everything, she added. “Choosing the right time of year to divorce could significantly impact on the financial outcome for each individual.”
She explained that from the point of separation, couples have until the start of the new financial year on 5 April 2022 to transfer assets between one another without incurring capital gains tax. This includes the split of gain on investment portfolios and jointly-owned properties.
“Starting earlier in the tax year will give you more time to complete the transfer process and can relieve some of the pressure from the situation.”
When it comes to pensions, finding a way to achieve a clean break so you are not tethered to your partner forever is crucial, Cule said.
There are two main ways of dealing with pensions at divorce that apply across the UK.
- Pension sharing achieves a ‘clean break’. This involves couples splitting one or more pensions. The aim is to ensure that the future incomes of both spouses are equalised.
- Pension offsetting sees pension rights balanced against other assets, such as the home. Typically, if one spouse has a pension fund worth £500,000 and the couple jointly own a property worth £500,000, one may keep the property and the other keep the pension.
“A financial expert can be invaluable in guiding you through the myriad of financial decisions from valuing and splitting pensions, financial disclosure, income planning, valuing investments, managing tax and implementing court decisions to get your finances back on a sound footing,” Cule concluded.
Minimising financial risk for women
Seeking guidance and input in times of divorce can be particularly important to women, who are generally less experienced when it comes to working with financial advisers.
Ceri Griffith, principal at Willow Brook Lifestyle Financial Planning, focuses on removing financial vulnerability and disadvantages for divorcing women.
In a post on the firm’s Facebook page, Griffith said divorcees across all countries report that they discovered negative surprises when they were forced to take control of their finances.
“Most of my clients are seeking expertise to help them take control of their finances and help them ensure that their money is really working towards designing the life they want. Often this is because they are thinking of, or have decided to, get a divorce.” Griffith said on her LinkedIn profile.
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