Divorce advice: Splitting in a recession
January often sees an upsurge in relationship breakdowns after Christmas tensions boil over, and with hard times ahead, prompted by the coming recession, are expected to see a rise in divorce.
During the course of the last recession in the early 1990s, levels of divorces increased - as the hard times were just too hard for many couples.
House price drops could also raise levels of relationship breakdown.
For every unexpected ten per cent house price drop, an extra five per cent of couples will split, according from the Institute of Social & Economic Research, as the value of the biggest family asset, its home, falls.
Younger couples, the research found, were also more likely to split.
Coping with divorce
Coping with divorce is draining. The more couples bring together financially and emotionally the harder it is to part. Major assets such as a home or a pension fund can be difficult to un-twine. The high emotions surrounding a divorce only further complicate the matters.
"Firstly you have to make the decision, is this really the end?" explains Paula Hall, psychotherapist and author of the Relate Guide How to Have a Healthy Divorce.
"Then you have to break up and handle the emotions and anger healthily.
"You need to take support from friends and family and learn how to move forward."
She also suggests the services of counselling such as Relate, not only to try to fix a broken relationship but to work out how to move on.
"Leaving a property and moving out, you should certainly see a solicitor to make a financial agreement," she advises.
As well as dealing with joint finances, you should also look at how you can cope alone.
"You must consider your finances," says Ms Hall. "Two homes are more expensive than one to run.
"You have to think about how to be practical and not think what is enough money for me, but what you have."
She adds money can complicate issues: "There is the sense people think 'you owe me, you had an affair'.
"But you have to look at what you have and decide to amicably split. Think how much you need to live on and what you have left and what it is possible to live on."
Getting a divorce
The nuts and bolts of getting a divorce - if both sides are amicable - can be relatively easy and there can be no need for lawyers to get involved.
But both parties need to be in agreement over the splitting of assets, or on the maintenance of any children and a wait of two years is needed.
Much of the legal terminology surrounding divorce can be difficult to get round so help from Citizens Advice may help to fill in the necessary forms, and can help you find a solicitor.
Where complex finances are muddying the waters, it may be helpful to seek professional advice through the maze of Decrees Nisi and Absolute.
Hazel Wright, head of the family law department at Cumberland Ellis LLP, explained there will be at least one meeting with a solicitor.
"For most people a divorce is likely to be the most important process of their lives," she explains.
Ms Wright explained there are five main ways of getting a divorce.
Firstly a BIY divorce is possible, but only if both sides get on well - and this can be difficult in many cases. Even so, legal documents still need to be filled.
Secondly, you can go to a solicitor and leave it in their hands.
"Most solicitors charge an hourly fee, how much time they need depends on finances and needs of children that need to be looked after," Ms Wright says.
Beyond these traditional ways, it is also possible to try mediation. A professional trained mediator - who could be a solicitor - sits with the couple and they discuss the problems they face and resolving their differences.
Mediation can reduce legal costs, but meeting face-to-face with a former partner can be emotionally draining.
Collaborative law is a further method - similar to mediation - but the partners meet with their lawyers.
"Lawyers can give legal advice in mediation and state what parties can and must do or not do. It is private and allows for much wider openness," Ms Wright says.
Finally there is the option of going all the way to court, although this stage is rarely reached.
Advice on divorce is available at:
direct.gov.uk's Getting a divorce guide.
Advice Now's Divorce survival toolkit.
Splitting a home and a mortgage
Some of the most common questions into the myfinances.co.uk Ask the Mortgage Expert section are from people splitting up.
The mortgage can often be a major stumbling block as the bank is also involved, and a single income may not be deemed as enough to cover a mortgage from the lender.
People provide stories of ex-partners unwilling to sell up, or meet their mortgage obligations.
Walking away from the house does not release you from your contract with the mortgage company or automatically revoke your interest in the property.
So, it is an issue that needs to be cleared up.
Your home does not necessarily need to be sold - but you do need have to decide how the equity of the property will be divided and who will pay the mortgage.
To take your name off the mortgage you must have the lender's consent. And for that to be given an ex has to meet the lender's criteria, showing they can afford the mortgage in their own right.
If this is agreed, a Transfer of Equity is required - where a solicitor changes the ownership with the Land Registry.
If there is any disagreement - with one partner failing to make payments and not wanting to be bought out - then it could be necessary to go to court and get a court order to force them.
Considering not paying and putting the mortgage into arrears should be avoided - as the black mark will appear on both partners' credit records and make moving on harder.
The best advice in this case is to meet with a solicitor, or the Citizen's Advice Bureau, who will explain your position and options.
A further issue to muddy the water is how a home is classed in the ownership documents.
All depends if you are tenants in common or joint tenants.
If you are joint tenants it is deemed a couple own the property 'as one'. This can make splitting it much harder - especially if there are disagreements over who has made a greater share of mortgage repayments or who provided the deposit.
Tenants in common can have an unequal share of a property - say 60/40 - so buying out a partner can be clearer.
Pension
A pension can be a major asset for couples - but often it is overlooked.
A study by Standard Life found in only one in ten divorces is the pension fund split.
"People often forget how valuable their pension is," explains Andy Tully, pension policy manager at Standard Life.
"They overlook how valuable it is but it can be the most valuable asset after a house."
Pensions are often forgotten and splitting up of pensions can be complex, but there are two main ways a pension fund can be split.
"Most of the time the person whose pension fund it is keeps it and the ex gets an asset of equal value - this is known as offsetting," Mr Tully explains.
"The other way is for pension to be split into equal chunks, or pension sharing, and the non-member takes any their share and it becomes their pension fund."
Splitting a pension fund can be preferable as starting a pension from scratch in your 50s can be costly - but it does involve solicitors, court orders and can take time.
"Which you opt for depends very much on your immediate priorities, such as having somewhere to live," explains Mr Tully.
From April this year, changes to pension rules after a divorce may make it easier for someone to take their share of a pension fund and take some cash.
Currently there are strict rules on how pension funds received in a divorce can be used. From April, a non-member of a pension (usually the wife) over 50 will be able to take a lump sum tax free from a pension fund.
"When going through an emotional upheaval like divorce or separation, pensions are unlikely to be at the forefront of people's minds," said Mr Tully.
"But it is crucial to be aware that starting afresh can have serious implications on your financial future; either by having to forfeit part of your pension to an ex-partner, starting a retirement fund from scratch, or beginning a new relationship with new financial responsibilities.
"It is crucial that people going through a divorce consider the financial implications, save where they can, and seek financial advice. Essentially the bottom line is that the more money you can afford to save and the earlier you start saving in life, the more secure your retirement."
Cost of divorce
Couples on average jointly face a bill from divorce of £28,000, according to research by Norwich Union.
While most share the costs of a divorce, almost half still have to dip into savings to cover the expenses they face - from paying for lawyers to the costs of setting up a new home.
Damian Boylan from Norwich Union said: "A broken heart is not the only cost of a split - our research reveals the rising divorce trend is being matched by the soaring financial toll of dissolving a marriage.
"It's important not to forget about these costs and plan for the impact they will have on already stretched personal finances."
After divorce
While working through a divorce, it's also important to look at life after divorce.
"Give yourself time and focus on what you can achieve. Set goals, have dreams and maintain ambitions," advises Ms Hall.
Breaking up can be difficult, get there is a future.
"It is really about maintaining optimism," she concluded.
Daniel Barnes
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