Impact of divorce on financial assets

I was reading an article recently which said that while divorce and relationship splits are a tricky subject to broach – certainly from a financial viewpoint – there is still a worrying lack of protection afforded to those in that position.

In the article it stated that research by Kleinwort Hambros found that a quarter (27%) of British adults in a relationship don’t have any financial protection to cover themselves in the event of a relationship breakdown – a further 37% said they were whether they had mitigated any financial risk.

However those of an older age are more likely to have some protection in place.

Paul Kearney, head of private banking for Kleinwort Hambros, said recently that relationship splits are very “isolating” and “life-changing”. But, from a financial perspective, if managed properly can help people regain control in their life.

“One of the most important issues to consider is the financial settlement, which involves navigating a complex set of decisions that will have serious implications for the future,” said Kearney. It’s essential to seek support from a team of professional advisers who can help make informed choices.”

For adults looking to protect their household and personal finances, the most common way this is done is through marriage law (35%), with an informal verbal agreement with their partner (13%) the second-most common.

While marriage and civil partnerships offer the most financial protection in terms of the redistribution of assets and income post-divorce/dissolution, pre-nuptial agreement are becoming more common, according to Alex Davies, partner and head of family for lawyers Cripps. “This does require honest and frank conversations, but many people find that a positive experience,” he said.

“For those not wishing to formalise their relationship in those ways, cohabitation agreements are extremely effective in setting out the financial rights and responsibilities of each partner whilst living together and what they can each expect if they separate,” Davies added.

Hopefully, it will not happen to you, but if it does a conversation with your Financial Adviser might not go amiss either.