August 28th, 2020
3 reasons clients should take financial advice on divorce
Divorce proceedings are challenging for anyone, but the financial implications can be particularly difficult to navigate for both parties.
There are a vast number of issues that can arise during this time, and if things don’t quite go to plan your clients run the risk of losing out on their hard-earned assets and arrangements.
With that in mind, here are just three reasons why your clients should consider taking financial advice during a divorce.
1. Fairer pension sharing
Pension arrangements can be one of the largest financial assets of a marriage, beaten only by the valuation of the (now former) marital home.
Despite what many believe, there’s no automatic entitlement to a pension after a divorce – meaning your clients won’t necessarily receive half of their ex-spouse’s pension by default. They will therefore need to make sure their divorce discussions include pensions if they want to protect their future finances and retirement plans.
When it comes to splitting pensions, your clients have a few options on the table, including pension offsetting, pension sharing, or a Pension Attachment Order. Regardless of the route they go down, valuing pension benefits can be a particularly complex matter, especially if there’s a Final Salary Pension Scheme involved.
For this reason, your clients might benefit from working with an Independent Financial Adviser who will assess their individual circumstances.
How we can help:
Once pensions have been divided by a Court Order and a settlement has been agreed, a financial adviser can help with the implementation. This might include the complex matter of splitting pensions without either person breaching annual or lifetime pension allowances.
Alternatively, one party may have limited pension provision and need to start making contributions.
2. Retaining adequate protection
It’s something that can easily be overlooked in a divorce, but it’s essential for your clients to consider any protection policies they may have, such as life insurance, Critical Illness cover, or Income Protection.
If not given proper consideration, existing policies could be cancelled or transferred to a single name, leaving one party at risk should the unthinkable happen. And if there are children or a mortgage to protect, the issue only becomes more significant.
How we can help:
An independent financial adviser will be able to ensure your clients have the right cover in place after their divorce is complete. This could involve separating joint policies into single ones, one person taking over a policy while the other makes new arrangements, having the policy encashed, or changing the beneficiary on their life insurance.
IFAs can also advise on, and arrange protection policies, for any child maintenance your clients might have to pay. This way, in the event of the death of either party, maintenance income will be protected.
3. Support when moving home
It’s thought that, in around two thirds of divorce cases, the marital home ends up being sold – whether due to the difficulty of keeping up with costs on a single income, or simply because of the emotional toil associated with staying there.
Naturally, there are a variety of housing issues associated with divorce. Your clients may be in need of advice if:
- They want to buy out the other party
- They want to sell and buy a new home
- They’re selling and will have a lump sum on completion
- They want to transfer part of the value of the property from one party to the other.
How we can help:
Regardless of what the separating couple chooses to do, an IFA can help ensure a more positive and fair resolution when it comes to moving home. They can advise on buying a new house and the subsequent new mortgage requirements, removing one party’s name from a joint mortgage, or buying out the ex-spouse’s share in the current home.
If your client has a lump sum as a result of the sale, they can also best advise what to do with it, from buying a new property to investing in a pension, or even using it towards their children’s future.
Get in touch
We’re here to advise you and your clients on all aspects of financial planning. If you have clients who would benefit from advice, or you’re interested in how you can work more closely with us, please get in touch. Email email@example.com or call 01562 829 222.