As well as the legal process for formalising a divorce or dissolution, it is important that the couple also discuss how to divide their finances. Most couples have aspirations of doing so amicably, but is this possible and how can they ensure assets are actually being divided down the middle?
The starting point in any fair discussions is to have full and frank disclosure about their financial affairs. Both individuals must be transparent and open. This could be an informal exchange of financial documentation or with a more formal document such as a Form E.
If the initial disclosure gives rise to questions, or there are omissions, then it is important to ask questions. If there are genuine concerns about disclosure, there is a court application which can be made – where it is also possible to seek disclosure from third parties, but this is always a last resort.
The starting point is that matrimonial assets are divided equally. In many cases splitting the assets ‘down the middle’ doesn’t meet needs and there may need to be an adjustment. It is important to set out details about needs and aspirations with each other early on.
When an agreement is reached, to protect the couple in the future, it is essential that this is documented and approved by a judge in a binding financial order. There is also a requirement to file an overview of the couple’s finances with the judge to consider at the same time.
Disclosure is absolutely key to fair discussions and so it is important that separating couples take this duty seriously. If there later transpires to be material non-disclosure, final orders could be set aside.
Once the assets have been disclosed, the next step is to apply a value to the assets and consider any tax. This may require input from third parties about pensions, businesses or properties.
Take advice from a financial adviser or actuary as to how pension assets should be divided if they are to be shared, or they will be offset against other assets. Transferring a portion of pension to equalise the values doesn’t always give the outcome a couple are looking for.
For example, if there are defined benefit pensions these can often be more valuable, some occupational pensions have guarantees within them adding to their value, if there is a Self-Invested Personal Pension (SIPP) then it may own property and it is important to make sure the valuations of assets within a SIPP are up to date.
Pensions are very valuable assets and they are often overlooked - careful consideration must be given to ensure that if a couple do want to split everything down the middle, that this is actually achieved.