The first financial steps when your relationship breaks down
Separation and divorce are difficult enough, without having to worry about unravelling your finances, but there are things you can do to make it easier. Our guides take you through what you need to know step by step…
When you are dealing with a relationship breakdown, having to worry about money can seem an unnecessary complication.
Cara Nuttall, a partner at family law firm JMW Solicitors, says: “It’s not always easy to cooperate when you and your partner are sad, angry, hurt, or all of the above.”
“However if you make a small start early on, it can make things a lot easier in the long run. Avoiding money issues will only store up more worries for later.”
Make a list of priorities and work your way through these. Don’t try and do everything in one go.
Here are three things you need to bear in mind before you start:
- Avoid getting into debt, or getting into more debt.
- Avoid unnecessary expenses – this is where mediation might help – by making the most of free advice.
- Avoid making long-term decisions without getting proper input from either your partner or a legal/financial/independent expert.
The household bills
Your immediate needs should be your household bills. These need to be covered on a day-to-day and monthly basis. These include your utility bills, such as energy and water, and mortgage payments. It’s best to deal with these from the start as they have the potential to cause problems, particularly in the early stages of separation where joint accounts may be being moved around and divided.
- Work out how much you need to find each month to cover all your bills – make a list of all the bills that need to be covered. Don’t leave it to chance check your last few bank statements. Take control – use the Money Advice Service budget planner to help track your household spending.
- Find out which account the direct debits come out of and which companies (and who) needs to be paid.
- You and your ex-partner then need to agree an arrangement to make sure everything gets paid on time.
- If one of you is moving out, find out about transferring the accounts into the name of the person who is staying put.
- Then make sure there is enough in the accounts for the bills to be paid.
Cara says keeping the status quo, if it still works for you, is an option. If one of you doesn’t mind continuing to pay the bills from your account and if you know everything is covered, then agree to keep it as it is. Only do this if you both feel comfortable, remember you have every right to question any arrangement if it is not working.
This is another immediate priority, but when it comes to longer-term decisions you will need to weigh up your options carefully and seek independent professional advice.
Where you live will depend on two things:
If you rent
If this is the case, then you need to consider in whose name the tenancy agreement is in. If it’s a joint tenancy and you both decide to move out and both moving into new places, you will need to give your landlord notice. If one of you is staying put, you need to contact the landlord about transferring the tenancy agreement.
If you own
You need to start thinking about whether to sell the family home or whether one of you can afford to take on the mortgage and find a lump sum or loan to buy out the other person. This is when you might want to consider contacting an independent mortgage advisor about how much you can borrow, and think about how much the house might be worth. The Money Advice Service has a guide which can help you choose and find an independent financial adviser.
It might also be worth contacting a local estate agent who can give you an informal appraisal to get you started. You can ask around or find one that is a member of the National Association of Estate Agents.
Looking to the future
Less urgent, but something you will need to consider, is what happens if one or both of you die. If you have already made a will, do you want to change it? Basically, would you be happy for your share of the house to pass automatically to your ‘soon-to-be’ ex if you died before things were sorted out? This is when you need to talk to a solicitor. The Law Society has a helpful service which can help you find a local family law solicitor.
Get statements for all your accounts and investments and encourage your partner to do the same. Do this with your pensions too. Then you can see what’s there, so that you can then consider how to divide it. This is a complex area and you will need to speak to an independent financial adviser who specialises in pensions. The Money Advice Service has a guide which can help you choose and find an independent financial adviser.
Sort out your debts
Find out what you owe and see if you can agree on who should pay off what and when. Make sure that debt repayments are not overlooked.
You might be entitled to benefits. To find out, you will need to contact your local Job Centre.
There is also a guide to benefits on the Money Advice Service website.
You may also be entitled to a council tax reduction and potentially housing benefit. This is a benefit you need to apply for through your local authority, find out more on the Gov.UK website.