Today has been dubbed 'divorce day' by lawyers as the number of disillusioned couples deciding to split hits a peak. If this sadly includes you, here's a look at how the two of you might keep the cost of divorce down.
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10 January 2022 is 'divorce day'
The first working Monday after the New Year is dubbed 'divorce day' by lawyers as it's the time when the number of breakups soars, meaning big business for solicitors.
It's a pretty depressing affair. Going through a divorce isn't just emotionally draining – it can also weigh heavily on the finances of both parties.
As Emma Hammond, financial planner at Charles Stanley explains: "Getting divorced is a costly process. Solicitors' fees are likely to be high, even if a financial settlement has been negotiated and agreed.
"If agreement has not been reached and the case goes to court, you could likely expect these fees to increase substantially; particularly if children are involved.
"A divorce can materially impact upon all aspects of your life and continue to affect your plans for the foreseeable future.
"Whilst many divorcees may have used a mediator to help them reach a divorce settlement, adding the expertise of a financial planner will undoubtedly aid those negotiations and can help avoid a costly court case."
If you’re considering a divorce, read on to find out how to do so cheaply.
But as a first step, why not take a look at this divorce calculator from Money Helper (formerly Money Advice Service), which will give you a broad idea of how your finances might look once you split up your assets.
Cohabiting and splitting up... what it means for your money
Common divorce mistakes
Given the huge financial implications, it's important you try and minimise the extent of the financial hit you'll take when getting divorced.
Sarah Coles, financial analyst at Hargreaves Lansdown, has identified five common divorce mistakes to avoid:
"1. Not understanding the value of what you have
The divorce process involves dividing your assets, so you need to understand the value of it all. This includes pensions. Couples often offset assets, but it’s important to appreciate the value of what you are giving up and possibly speaking to a financial adviser.
2. Not appreciating all your options when it comes to pensions
There are a few options to consider, so you need to be certain you choose the best one for your circumstances – see ‘Your Pension Options’ for more details.
3. Not rebuilding fast enough
A divorce won’t just split your assets, it can cost a fortune too, so you need to focus on getting back on track after the divorce. You should be paying into emergency savings and rebuilding your pension.
4. Paying more tax
If the divorce is completed in one tax year, when you pass investments between you and your ex, there’s no capital gains tax to pay.
If you go into a new tax year, you may be liable. The rules on this are set to change to give divorcing couples more time, but we don’t yet know when this will kick in.
Older couples are far more likely to have more investments, so are more likely to be subject to CGT. There are steps you can consider, like bringing transfers forward, so you will need to discuss these with your lawyer.
5. Damaging your credit rating
If you still have a mortgage, talk to your ex about it. If you’re both named on the mortgage, then you’re both liable for the full amount, so to protect your financial position you should try to maintain payments in the short term.
If possible, try to agree this between you. If your ex refuses to pay their share, or you’re struggling to pay yours, talk to the mortgage company and see if they will allow you to pay interest-only for a period, or take a break while you sort something out."
Divorce fees: how much it will cost
Unfortunately, divorces can often be complicated, messy – and expensive.
If you are the one seeking the divorce then you are the petitioner and will pay £450 to £950 in solicitor’s fees and £593 in a divorce centre fee, according to Money Helper – making a total of £1,000 to £1,500.
As this article explains: "If you are the other spouse then you’re the respondent. You will not need to pay a divorce centre fee and your solicitor’s fees should be lower. Making your total £240 to £600."
If you want to get divorced and can't afford the fees, it's worth looking into whether you qualify for Legal Aid, which is offered to low-income households.
The rest of this article will look at the different options available to you when getting divorced.
'Quickie' divorces
Some companies offer a ‘quickie’ divorce, which aims to make the whole process more affordable and less time-consuming.
You can get a divorce in a few months, but it currently takes around a year in most divorce cases.
Co-op Legal Services offers a £450 fixed-fee divorce, but it only covers ‘uncontested’ ones in England and Wales where a spouse does not ‘defend’ the divorce.
You’ll still need to pay a £593 court fee on top of this.
Make sure you're not getting a 'false economy': read our guide to picking a solicitor
DIY divorce
Mediation
All divorcing and separating couples are referred to mediation before they are allowed to go to court.
This means an independent mediator will sit down with both parties and try to come to a final agreement on how assets will be divided, and what will happen with any children (or pets!) the couple may have.
While you must attend a Mediation Information and Assessment Meeting, you are not obliged to commit to the process afterwards.
Generally, mediation will take two to four sessions.
There is no standard fee for mediation.
It’s worth remembering that while it will likely be cheaper than heading straight to court, it may be testing emotionally, having to spend hours in a room with your soon-to-be-ex arguing over the fine details of your split.
Divorce and pension splitting: all you need to know
Collaboration
Collaboration works in a similar way to mediation, in that both parties sit down to work out who gets what, outside of the courtroom.
But the difference is that the process can involve far more than just the two parties and an independent mediator.
With collaboration, each party will not only have their lawyers present, but there may be all sorts of other professionals involved too, from accountants and life coaches to children’s counsellors.
The idea is that this way, you reach the fairest outcome, whereas with mediation there is the risk that the ‘dominant’ party may force through a better deal than is merited.
For example, with mediation, an unfaithful husband may hand over more than he should out of guilt, or a housewife unfamiliar with the family’s finances may get a raw deal.
I want a pre-nup!
Whenever there is a high-profile break-up, there is always a discussion of whether there was a pre-nuptial agreement in place.
This is basically where both parties agree how the finances will be handled should they split up.
It tends to be something the very wealthy use to ensure that should they marry a mere mortal like you and me, we can’t make off with all of their cash if it all goes awry.
It’s worth remembering a prenup is legally binding in UK law if it is drawn up by a qualified solicitor, all assets are disclosed and is confirmed as fair as possible by the solicitor.
Both parties need to seek legal advice and agree to the prenup, which needs to be signed at least 21 days before the marriage.
Even before you head down the aisle, it pays to consider what should happen if the marriage doesn’t last as it could save you a fortune in the long run!
We asked family law experts at law firm Vardags to put together a guide to pre-nuptial agreements and how to get one.