Research shows that divorce can have a significant impact on wealth.
While many people begin to build their wealth during their forties, as mortgages are paid off and pension pots grow, this is also the time when couples are most likely to divorce, which can be a setback to financial plans. I was recently asked by Angelique Ruzicka of the Daily Mail’s This is Money supplement about the steps individuals can take to protect their wealth in the event of a divorce.
Every relationship is unique, as is every divorce, so the outcome of any split will always vary depending on the circumstances of the couple and their family. The Family Court generally applies wide discretion on a case-by-case basis, but the priority will be to achieve a fair outcome that meets both parties’ needs while factoring in those of their children. Divorce can have a significant impact upon your personal wealth, so a prenuptial agreement is recommended as a way to protect your assets.
On divorce, the Family Court can consider all “financial resources” available to a couple. This can include their income, pension, business or trust assets. In my experience, people are usually most concerned to preserve final salary pensions or family assets that may have passed through the generations such as a business or trust. These should be specified within pre-nuptial agreements where possible.
While the short-term impact of divorce may be damaging, it is possible to rebuild your wealth. Where possible the Family Court seeks to achieve a clean break on divorce. The advantage of this is that any future wealth can be protected from any future claims by a former spouse. While divorce may often involve transferring assets or pensions, or making payment of income to a former spouse, there are ways for a final agreement to be drafted to ensure protection in the future.
If you would like to discuss any of the issues raised in this blog, please contact a member of the Family Law team.
