In the penultimate episode of this ‘Family Matters’ season, Simon and Bex discuss ways of dealing with some of the financial matters that can arise when couples divorce.
Some key points of interest covered in this episode include the following:
- Simon comments that while he lived through a divorce as a child and feels that it is a very important topic to cover in the current ‘Family Matters’ season, he is not a financial specialist in that area. [01:27]
- In response to a question from Bex, Simon explains that this episode’s discussion will focus on financial issues associated with marriages and civil partnerships coming to an end; cohabiting couples have different rights under the law, which fall outside the scope of this episode. [02:43]
- The first financial step to take once a divorce is in process is to identify relevant assets. This can be quite a complex task, partly because it can comprise so many different elements and partly because it is not always a straightforward matter to understand and identify the exact nature and value of items such as pensions. [04:57]
- Another complicating factor is that it is not necessarily the case that every possible asset belonging to each member of the couple will be deemed to be available for sharing. [06:39] In that context, it can be important to understand the following terms: (i) matrimonial property – wealth that has been added during the relationship [07:59]; (ii) non-matrimonial property – assets that have been brought into the relationship [08:57]; (iii) matrimonialised property - resources that have been brought into the relationship and have then been deployed in some way during it. [09:42]
- The process of valuing assets during a divorce can be complex and contentious. It can be difficult to arrive at agreed valuations, with pensions posing a particular challenge because of the tax and timing factors that need to be taken into account. [10:46]
- Prompted by Bex, Simon suggests that it is good financial planning for assets in a relationship to be allocated, as far as possible, to each member of the couple on a fairly equal basis so that each of them can have access to an emergency fund, for example. That kind of approach can also help to provide the basis of a fair arrangement, should wealth need to be divided as part of a divorce settlement. [12:32]
- When it comes to splitting assets, it can often be hard to know how best to deal with a property. The situation with a house can be difficult, if it is not being sold, as it cannot simply be divided in half, and the process of deciding what kind of price to place on it is also not entirely straightforward. [15:01]
- Whether or not assets should be divided completely equally is a legal decision. [17:11]
- Because of tax considerations, pensions can be particularly complicated assets to distribute. [18:22] As part of a divorce, pensions can be allocated in one of three ways: (i) pension sharing [20:04]; pension offsetting [21:38]; (iii) pension attachment [22:51].
- Generally, offsetting is the approach taken to dividing investments, but it can be important to understand any taxation arrangements that apply so that fair and balanced arrangements can be made. [23:47]
- Finally, Simon suggests that a collaborative approach to divorce, as described on the resolution.org.uk website, can have definite benefits, as long as both parties are on board with the process. [26:17]
- The final episode of the ‘Family Matters’ season will explore some of the financial matters that can affect hybrid families. [27:42]
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