Marriage separation - getting your financial ducks lined up
A marriage breakup is usually a traumatic time. Very significant life decisions are needed about custody of children and access arrangements, and where each party will live. Often relations between the parties become quite fraught… and then financial arrangements need to be agreed.
At this stage, the difficult areas of dividing up the assets, maintenance payments and agreeing the ongoing repayment of debt need to be tackled. Having a financial planner involved in this process is very valuable, as they will approach the task in hand without emotion. Our job is simply to achieve the very best outcome in relation to the financial issues that will inevitably arise.
So to help you, here are some of the areas that we can help you with.
We’ll start with our lack of emotion
We’re actually as emotional as the next person… except when it comes to our clients’ finances! At this highly charged time, it is invaluable to have someone at the table who will leave emotion at the door, and who will look coldly at the financial picture. Sometimes a potential solution such as selling a family home in order to buy two smaller homes needs to be voiced, but often it is difficult for both parties to agree this themselves. Having a voice of reason can save a lot of time, expense and additional heartache.
Make sure you get (the right) life cover in place
Once an agreement for maintenance payments are put in place to support the other spouse and children, it is very important that life cover is put in place to secure these payments in the event of death. However we strongly suggest that you seek advice in relation to the type of policy and the beneficiary profile in order to reduce the Capital Acquisitions Tax (CAT) liability on receipt of the benefit.
If you are the recipient of maintenance payments, it is also important to ensure your ex-spouse has adequate income protection cover should he/she be unable to work because of illness or injury. Also we’ll help you to ensure that you retain any health insurance cover, as lapses in cover can lead to increased cost or indeed reduced coverage down the road.
Be realistic about household expenses
This is particularly important if you previously didn’t pay too much attention to the money being spent by you and your ex-spouse each month. If you are to be the recipient of maintenance payments in the future, you need to immediately take a forensic look at what is spent to maintain the family. You need to track and document your monthly expenses very diligently, and also think through the one-off expenses that arise during the year – motor expenses, education expenses, holidays, club fees, insurance costs etc.
All of these costs quickly add up and we can help you think through them all. However we don’t have a magic wand to make them go away – the reality going forwards is that (in some cases) a single income may have to sustain two households, so sacrifices often need to be made.
Pensions are a minefield – we’ll help you through it
Pensions are complex beasts at the best of times. On separation they become even more complicated. We can help you to ensure an equitable solution in relation to an ex-spouse’s pension, through the application for a Pension Adjustment Order (PAO). This entitles you to a share of your ex-spouse’s pension fund.
There are different ways that these can be established. The benefits for both parties can remain in the pension scheme until the pension scheme member retires, or instead the non-member can transfer their share of the assets to their own arrangement. We’ll help you identify what’s the right approach for you.
We’ll help you to minimise the tax bite
This can emerge in many ways. If people are generally inexperienced in financial matters, we can help you structure your income tax payments to avoid any nasty (big) tax bills. We can also advise you in relation to the transfer of assets between both parties to ensure this is done as tax efficiently as possible. And we can help you reduce where possible any future inheritance tax liabilities.
Separation is very difficult and the financial repercussions can be immense. Don’t let them spin out of control – we can help you maximise the value of every euro that is available.