Recent data suggests that the decision to separate is becoming increasingly complex due to the economic climate. At Gibson Kerr, our family law team understands that divorce is not merely an emotional transition but a significant financial restructuring. Our goal is to mitigate the adverse effects of separation through careful, strategic planning.
The Financial Reality of Modern Divorce
New research has been carried out by Legal and General and reported in the press. This reveals a stark reality: financial pressures are causing many couples to remain in unhappy marriages. Approximately 280,000 recent divorces in the UK in the last five years, translating to 17% of the total, were delayed specifically due to money struggles. Couples cite income concerns (13%), rising living expenses (12%), and the immediate costs of the divorce process itself (12%) as primary reasons for stalling their separation.
Once the process begins, the financial impact can be severe. Research indicates that for 45% of people divorcing their annual incomes drop by an average of 30% in the first year following a divorce. This shortfall is compounded by increased living expenses and the costs associated with setting up a new household. The divorce process alone carries a significant cost, leading many individuals to go into debt just to fund it.
The Pitfalls of Uninformed Decisions
Perhaps the most concerning finding is that 40% of divorcees believe their settlement was financially unfair. This dissatisfaction often stems from a lack of professional guidance; despite the complexities involved, only 7% of people consult a financial adviser during their divorce.
Without a clear strategy, separating couples often fall into common traps:
- Overlooking Pensions: While half of divorcing couples consider the value of the family home, a smaller percentage take pensions into account when dividing assets. Alarmingly, 23% actively waive their rights to a pension, which can have devastating long-term consequences for retirement planning.
- Estate Planning Oversights: Nearly 900,000 divorced people have failed to update their wills, risking unintended inheritance disputes. Furthermore, many neglect to remove former spouses as beneficiaries on life insurance policies or pensions.
The Gibson Kerr Approach: Mitigating Risk through Strategy
At Gibson Kerr, we believe that “a divorce is as much a dissolution of a legal contract as it is the end of a relationship”. To ensure a fair outcome, we advise clients to look beyond immediate emotions and adopt a comprehensive financial strategy.
We work to mitigate the financial shock of divorce by helping you:
- Establish a Realistic Budget: We assist in accounting for new living costs, legal fees, and shared debts to ensure your settlement is sustainable.
- Conduct a Full Asset Review: We ensure no asset is overlooked, specifically placing focus on pension valuations to protect your long-term future.
- Secure Your Future: We help clients to ensure that any settlement will secure their future. We advise on updating wills and insurance beneficiaries immediately.
The research suggests that consulting qualified professionals is essential to ensuring a divorce is “fair for all involved”. By combining legal expertise with strategic financial planning, the family team at Gibson Kerr aims to help you navigate this challenging transition with your financial health intact.
Should you wish to discuss any of the above, please get in touch with our team and one of our family solicitors will be able to meet with you to advise you on your options.
DISCLAIMER
The content of this page is for information only. It is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Gibson Kerr Ltd accepts no responsibility for the content of any third party website to which this webpage refers. Gibson Kerr Ltd is regulated by the Law Society of Scotland.