Seven ways to protect your finances from back-to-school divorce risks

• Typically, January and September have tended to see a surge of divorce enquiries with lawyers – after traditional family holiday periods
• In Google search terms, the peak over the past 12 months was in mid-August
• Google searches for ‘divorce’ over the past seven days hit their highest points in the early hours of the morning
• Previous ONS data shows the average time from marriage to divorce is 12.7 years, which is plenty of time for your finances to have become intertwined
• There are seven steps to take to protect your finances in the event of divorce

Sarah Coles, head of personal finance at AJ Bell, comments:

“It’s too simplistic to say that spending weeks trying to placate a squabbling and demanding family could be enough to make anyone consider divorce. Prolonged time together can exacerbate existing problems, but there’s also a lot more going on.

“There will be couples who didn’t want to rock the boat with a holiday on the horizon so have been biding their time. There are others who need the space after the kids have gone back to school, in order to explore their options. The fact that searches for divorce were at their highest in the early hours of the morning during the past week could be a sign of how difficult it can be to find the time and space at such a busy time of year.

“If couples end up progressing from searching their options to splitting up, it can be painful and complicated for everyone. Aside from the emotional upheaval, there’s also likely to be financial damage.

“You may own a home together; you may have all the assets in one name, including the pension; or you may have joint debts. All of this will need to be unwound, and rebuilt. It’s going to be a difficult process, but the earlier you can recognise that this is going to change your world financially, the better. If you try to cling onto your old life, it could end up over-stretching you and compounding your financial problems.

“As early as possible in the process, it’s worth taking key steps to help protect your finances from the fallout.

1. Talk to your ex about joint debts – including the mortgage

“If you took on debts together, and you’re both named on the mortgage you’re both liable for the full amount, so ideally you need to be able to come to an agreement over how the mortgage will be paid during the divorce process. If you can’t find a way to keep up repayments, it’s far more damaging to skip them than it is to contact your lender, explain the situation, and ask for help. They may be able to agree a repayment plan, possibly by pausing payments for a period or cutting them to something you can afford. They may also make more structural changes – like switching to interest-only or extending the term.

“Consider any joint credit cards too. In reality they aren’t actually joint cards. One of you may be the primary card holder, who is responsible for all the debt, so if that’s you, blocking them prevents debts being run up in your name. You will be solely responsible for repaying this debt eventually. The divorce may grant you money in order to do this, but in the interim, it’ll be up to you to keep on top of minimum repayments at the very least.

2. Make a plan for any joint accounts

“If you have a joint account for everything, arrange for your income to be paid into a separate account. If there are bills coming out of this joint account, you’ll need to arrange payment from elsewhere. Then you need to talk to the bank, and arrange for safeguards to stop either of you taking advantage. This could mean limiting borrowing or setting up the account so you both have to agree to any withdrawals.

“It may be tempting to dip into the account without consulting your ex, especially as legally the money belongs to both of you. However, it can cause rows and distrust at a time when both can be very expensive. It’s also worth keeping hold of statements, to show what was in the account at the time of the split, and any money withdrawn afterwards.

3. Switch to an emergency budget

“Money is always tight during a divorce, because you’re splitting money you used to fund one household between two – and you’re paying lawyers on top of that. This is why it’s so common for people to end up in debt during this period. Cutting spending to the bare minimum will help you limit any problems further down the line. It’s also important to think about the money you have coming in, and whether you now qualify for state support, or whether you need to generate more income. Some couples will rent out space in their property to help them through.

4. Understand the value of what you hold as a couple

“You will go through this when sorting out the finances in the divorce, and it’s vital not to overlook anything – especially pensions. They may be worth as much as the family home, so make sure you ask for a pension valuation from your partner, so it is taken into consideration during the split. You also need to think about how you ideally want to split those assets. In many cases, one of the couple will want to stay in the family home and will trade the pension against it. However, before you consider this, you need to appreciate what you have given up, and the impact it could have later in life.

5. Rebuild

“It’s hard to imagine, but one day the whole divorce process will be in the past, and at that point, the key will be to get back on top of your finances as soon as possible. If you have run up expensive short-term debts, these should be a priority. After that, you need to rebuild your emergency savings, and your pension, and you may need to think about buying a property. It can be overwhelming to have to start again at this stage, but allocating cash to each of your goals every month will help you make progress, and over time you can rebuild.

“You should also consider your credit record, which may have taken a hit. If your ex isn’t reliable with money and you had any joint financial products, your credit records may be linked, so once you’ve split, you can ask the credit reference agencies to remove the association, so their poor behaviour will no longer affect your record.

6. Re-write your long-term plans

“It’s easy to overlook, but it’s worth thinking about life insurance. Make sure you update the beneficiaries on yours, and if you’re relying on maintenance payments, consider insurance in your ex’s name to cover the payments if they pass away. It’s also important to revisit your will. Divorce will automatically cancel anything left to your ex in your will, and removes them as an executor, so you need to revisit it, and make sure it reflects your wishes. It’s also worth noting that separation doesn’t change your will at all, so if you think the divorce will be a long process, it may be worth making changes sooner rather than later.

7. Consider financial advice

“It can feel like a step too far when you may already be paying for a lawyer, but it can make an enormous difference to have a financial professional on your side. They can help ensure you understand all the assets of the marriage, and all your options. They can also be instrumental in helping you rebuild.”