5 effective ways financial planners help divorcees achieve financial security
While the size of the wealth involved makes the divorce of Bill and Melinda Gates somewhat unusual, the fact that they have decided to go their separate ways after decades of marriage isn’t.
The man behind Microsoft and his wife, both of whom are famous philanthropists, join a growing number of couples who decide to end their marriage later in life. As the most recent divorce data from the Office for National Statistics reveals, couples ending their marriage rose 18.4% in 2019 when compared to the year before.
While financial settlement is likely to be complicated, it’s unlikely that either Bill or Melinda will be left financially compromised when the divorce is completed. This cannot be said for many other people who end up in a financially vulnerable position after divorcing, according to research by Legal & General (L&G).
It reveals that 38% of over-50s feel their divorce was financially unfair, with some being as much as £30,000 worse off in retirement as a result. This startling statistic highlights the importance of speaking with a financial planner if you are thinking of, or going through, a divorce.
Read on to discover how a financial planner can help ensure you are financially protected both during your divorce and later on in life, using empathy and financial technology to help you look forward to a brighter future.
1. Only a fraction of those getting divorced seek the financial help they need
According to the L&G research, just 3% of those questioned said they took professional financial advice while divorcing, with the vast majority preferring to speak to family and friends.
If you’re considering a divorce, speak with a solicitor or mediator to ensure you have the legal representation you need. Likewise, talking to a financial professional ensures you fully understand your joint marital assets and the options open to you in terms of settlement.
Often, financial planners work best alongside solicitors and mediators, as the dialogue between them helps create a clear picture of your situation and find the best option for you.
By providing impartial, empathetic and non-judgemental information in clear language, financial planners help to reduce stress at a difficult time and enable you to plan for a brighter tomorrow.
2. Nearly a quarter of people waive their rights to a former spouse’s pension
Once again, Legal & General reveal a sobering statistic: 24% of people do not make a claim on a pension their former spouse has, something which could cause financial hardship in retirement.
While many will consider the family home as being the most valuable asset, a pension may be worth even more. This means that working with a financial planner to ensure you fully understand the value of your household’s pensions means you won’t be losing out on a sizable share of the assets you deserve.
By helping you get an equitable share of your ex-spouse’s pension, financial planners can ensure you have a brighter and more secure financial future. One way this can be achieved is by helping you understand your options around pension sharing.
3. You could share an ex-spouse’s pension using the following methods:
There are a number of ways you and your ex-spouse can split pensions, providing both parties an equitable share and financial security for the future. These are:
- A Pension Sharing Order: this is where the court splits the pension and determines how much the pension an ex-spouse is entitled to receive. Whatever you receive is treated as your money to do as you like with.
- A Pension Attachment Order: formerly known as “pension earmarking”, this redirects part or all of a pension to an ex-spouse when it’s due for payment. It should be noted that nothing can be received by the ex-spouse until the pension holder decides to draw an income. Previous earmarking orders issued in England still apply.
- Deferred lump sum: this is an agreement both parties make to share the pension at a later date. This can be a more complicated option.
- Pension offsetting arrangement: assets with a similar value to the pension can be awarded to an ex-spouse, such as the marital home. This means the original holder can retain the pension.
4. Financial planners create strategies to help provide the tomorrow you want
Using sophisticated financial software, financial planners can help create cashflow models that allow you to understand your options. This helps you to work through different scenarios to determine which will provide the best financial outcome for you.
Using the technology provides clarity during an emotionally difficult time that allows you to make better decisions.
For example, cashflow models could confirm whether a proposed settlement is likely to provide you with the level of income you need. Doing this helps you understand whether the settlement is enough, or whether you want to look at renegotiating for more.
5. They can also make the financial transition between marriage and your new life smoother
If you had been reliant on your spouse financially, going through a divorce is likely to be a frightening and uncertain period.
This is where a financial planner can help you create a financial strategy that can:
- Provide the space and time to explore all the options available to you as you plan for your new life
- Identify what assets you could use to generate an income or boost an existing one if needed.
- Help you identify your future goals and aspirations, and help you plan financially to achieve them.
- Clarify the marital assets and how you could best use these to achieve your financial and lifestyle goals.
- Understand any tax implications attached to a settlement.
As a holistic financial planner who has worked with many people going through a divorce, I’m familiar with the processes involved. This allows me to provide clear and understandable financial guidance at an emotionally charged and difficult time.
By providing non-judgemental, empathetic and clear explanations of your financial situation and potential options, I’ll help you create a more financially robust outcome and brighter future for you.
Get in touch
If you are currently thinking of divorcing or are in the process a divorce and would like to discuss your financial options, please call us on 0116 262 1414.
At Finance Lab we help you achieve financial peace of mind for yourself and your family, whether that’s meeting a financial goal, building an emergency fund or protecting the family’s future.
This article is for information only. Please do not act based on anything you might read in this article until you have sought professional advice.