What happens to your savings after you separate?
Separation and divorce are difficult enough, without having to worry about unravelling your finances, but there are ways to make it easier. Our guides take you through what you need to know about what happens to your savings after you separate…
The key to being able to split any savings or investments you may have amassed as a couple depends on two things:
- Whether you were married or cohabiting
- Whether the assets were in sole or joint names
Anne McClean is a financial planner with Charles Stanley. She explains that the starting point for splitting your savings is as simple as ‘who owns what?’
“In marriage, assets are generally considered to be within the shared marital pot. When cohabiting, unless jointly owned, assets are personal.”
Anne advises couples who are splitting to be “pragmatic and clear-headed about decisions”. It’s not easy, but keeping a cool head can help avoid resentment later on”.
For the purposes of this guide, savings and investments include savings accounts, investments, and collectables – such as art and antiques. When it comes to pensions, which are a form of savings, different rules apply. This is because they are taxed differently and cannot be accessed until you are 55. Find out more about pensions and separations here. [Add link to the pensions finance article].
Step one: Who owns what?
If you are cohabiting
It’s generally the case that any investments or savings in your name belong to you, and any owned in your ex-partner’s name belong to them.
However, it may be that one of you contributed towards something in your ex-partner’s name. This is when you may need to get legal advice as you may have claim to it. In law, this known as a ‘beneficial interest’ and in Scotland, as an ‘economic disadvantage’.
If you are married
Investments or savings are including in your financial settlement, although if you owned property or other assets before you got married, they may not be included. In Scotland, assets and savings built up during marriage are known as ‘matrimonial property’.
Some assets or savings which were acquired before you were married may also be taken into account. This is where you might need to seek legal advice. Find out about your options here.
Step two: What are your savings worth?
When you save into a savings account, like a cash deposit or a cash ISA, you should be getting regular statements. These will give you an idea of what they are worth. If you are investing in stock market-linked investments, including shares, investment bonds, with profit funds (this can include an endowment) or a unit trust, then you need to obtain a valuation. Mainly because the worth of these types of savings can vary from week to week. The value you get will be referred to as a transfer or surrender value.
If you bought these through a financial adviser, it may be a good idea to speak to them.
Step three: How do we split our savings and investments?
This depends on where your savings are:
These are tax-free savings accounts and can only be held in one name. So you can’t transfer the money over. If you want to realise the value, you would have to withdraw it from the account (losing the tax benefit) and give it to your partner.
If it’s a normal savings account you can transfer the money over to an ex-partner’s account, but if it’s a fixed-rate or notice account, you may lose interest if you take any money out without giving notice.
If one of you owns a property, then unless the other can show they have made contributions towards it, the property belongs to that partner, and this is the case whether you are married or not.
If one of you has made contributions, you need to decide how those will be paid back, and if you cannot agree, then you need to seek legal advice – this is the more expensive option – your best bet is to try and agree on an amicable solution.
If you own it jointly then you may want to either sell it – in which case it will need to be valued – or one of you buy it from the other partner. If you need a mortgage to buy your partner out of the property, check here to see whether you can afford it. https://www.moneyadviceservice.org.uk/en/articles/how-much-can-you-afford-to-borrow
You can either give your shares to your ex-partner, sell them to them, or sell them and give your ex-partner the money, or part of it. Again, it might be a good idea to get advice from an independent financial adviser, which you can find here.
To transfer shares, you need to fill in a form known as a ‘J30’ form, which can be downloaded from the company you bought the shares from. If you want to sell them, you can use the service you used to buy them, but bear in mind you will have to pay a fee.
What if I want to give my assets away to my ex?
Charles Stanley’s Anne McClean says if you give away an asset, you might have to pay Capital Gains Tax. “Married couples and those in a civil partnership can give away assets to their ex-partner without having to pay CGT. But couples who live together without marrying or entering a civil partnership who split up can’t do this.” So make sure you look into this before making a decision.