10 tips on saving money in a divorce

It’s not the cheeriest subject, but divorce figures look set to rise.

2010 looks set to be a record year for separation rates – with January being one of the busiest times of all for divorce lawyers. Internet divorce service Divorce Online saw a 30% rise in clients in December, while we expect to see an 80% rise in divorces during the first two weeks of January compared to December.

While the credit crunch has only added to the strain on many marriages, it has also caused many people to postpone major financial decisions and commitments (including divorce). However, as the economic outlook and property prices begin to look slightly brighter, many couples are now deciding to call time on their relationships.

If you’ve come to the decision to end your partnership, be sure to read our tips below before calling in the lawyers. Following this advice will ensure that your divorce goes as smoothly – and cheaply – as possible.

1. Choose the right lawyer

Ideally a Resolution accredited specialist. Not only will they have the expertise required but Resolution’s code of practice promotes a constructive and non-confrontational approach amongst its membership.

2. Choose the right court

If you are a foreign national or have foreign property, choosing the right country can dramatically affect the outcome. If you are the wealthy spouse avoid England where you can, while Eastern European and Nordic States tend to be much less generous to wives. Much closer to home, Scottish blood can be a real advantage. Wealthy Scotsmen living in England should give the English Courts a wide berth if they want to limit the amount of maintenance they pay. Even within England, there are regional differences and the London courts might not always be the best option. Beware of rushing into proceedings in England where there is foreign property to be considered.

3. Choose the right process

Court battles are not always inevitable or indeed desirable. Other dispute resolution models are available. Consider mediation or collaborative law – as well as being cheaper than a court battle, both offer a more dignified approach as well as self-determination. With the courts being opened up to the media, they also guarantee privacy.

4. Close the joint account/cancel joint credit cards

It may seem an obvious point but the ‘misuse’ of joint accounts/credit cards by the other spouse is rarely taken into account when the court makes a division of assets. With the benefit of legal advice, agree a monthly contribution to expenses early on. However (depending on whether you are the payer or payee) be careful not to establish a status quo that is too high/low.

5. Don’t move out of the matrimonial home

In the current climate, sales can be slow to achieve and if the reluctant party is in situ this can cause a real problem.

6. Sever a joint tenancy/make a Will

If property is in joint names and passes automatically to spouse on death, then you should (through your solicitor) end the joint tenancy and give notice that you wish to own as tenants in common so that your share can be left by Will. Don’t forget to revise your Will as well.

Also remember (where appropriate) to change nominations under death in service benefits/life policies/pensions. However, seek financial advice before cancelling joint life policies/endowments as it may be expensive to obtain new cover and may be unnecessary if your policy is assigned to a mortgage which you are retaining.

7. Don’t forget child benefit/tax credits

The receipt of child benefit may not make a huge financial difference to some. However, if you have a shared care arrangement of one or more children, the recipient of the child benefit will ultimately be entitled to child maintenance from the other parent.

If you are the non-earner/lower earner and have a child in your care, claim child tax credits immediately on separation. Maintenance/financial support from the other spouse is ignored and tax credits can be worth hundreds of pounds a month.

8. Increase your pension contributions

This will change in the next 12 months but currently (for the purpose of child maintenance) your income is assessed net of tax and pension contributions.

However, those with rental properties need to be wary of child support arrangements as assessment can be made on eight percent of gross value of property, rather than actual taxable income.

If you have been the lower earner, make sure you check the value of your spouse’s second state pension (SERPs), as it can be shares and in some cases be worth thousands of pounds.

9. Instruct an IFA

Preferably an independent financial adviser who is Resolution trained or at least one who offers charging by fees as well as commission. Good IFAs add value when structuring financial settlements and can provide much needed guidance on future income needs, projection and budgeting. Unbiased is a great, completely independent portal for finding IFAs and lawyers and is well worth a look.

10. Don’t live with a new partner until your divorce is settled

As their income/resources will be taken into account.