As a financial adviser, I see many couples with relationship issues and at times am feel like more of a counsellor than an adviser.
Separation and divorce is a very traumatic time of life; children are affected, emotions run high, and finances need to be addressed.
John Lowe of MoneyDoctors.ie looks at the financial steps to be taken if you are in the unfortunate position of revaluating your relationship.
1. Financial advice – perhaps even more important than obtaining legal advice. Have you and your partner the wherewithal to live separate lives - especially if there are children?
2. Very simply, it is down to the math:
- Can you afford to move out ?
- Income is your #1 asset (unless your partner can facilitate)
- Do you have a Rainy Day Fund? This is usually between three and six months annual income for those emergencies, sudden loss of income or that investment opportunity (leaving home without money leaves you vulnerable)
- If you have an income will it be enough to take out a mortgage with whatever equity you can obtain from the family home or your joint assets? Some lenders will now allow the same multiples for separated/divorced applicants as first time buyers - four times income.
- Can you buy your partner out? Can your partner buy you out?
- Doing a budget plan is essential – to know how much it costs to run your life (and maybe your children) on a monthly basis. Includes your children's education. Email me for a simple to use, easy to understand budget planner spread sheet – has all the categories and even tots itself up.
- If you want to save money, try mediation first.
3. Family – if there are children involved, you both must be responsible. There should be no dereliction of duties - especially when it comes to finances. This includes maintenance and not with paltry monthly amounts that wouldn’t feed the cat ! Minimising the pain for both adults and children is the name of the game.
4. Negotiations – sometimes trying to talk with your partner can be difficult so in many cases a third party is used, for example, a family member, a priest or religious person.
As stated previously, a mediator in preference to a solicitor will save you money and time. Ideally, if you were able to agree everything then it is a simple matter of notifying a legal firm of your agreement to part and ask for it to be implemented in the circuit court, where the judge has to make sure that proper provision is made for you, your spouse and any dependent children.
There are five different layers within the court system:
- District Court
- Circuit Court
- High Court
- Court of Appeal
- Supreme Court
If the separation is contested, the cost can be between €7,500 and €20,000 so it's well worth having a chat with your partner to avoid these costs.
You should also be as amicable as possible because more than likely you will have an on-going involvement with the ex partner throughout your life.
5. Make a new Will – if you are still married but not legally separated, all the assets will go your ex partner if you die.
If you have children, they will only receive 1/3rd of those assets whereas if you do make a Will, they could receive 2/3rds of the "estate".
For details of a low-cost DIY Will package, click on www.moneydoctors.ie/wills
Joint accounts should be closed and single ones opened. Check all direct debits and standing orders – you may even need to change your passwords on your mobile and your laptop.
Yes, it is a difficult time, but perhaps not as bad as it was.
For more information click on John Lowe's profile above or on his website.
The views expressed here are those of the author and do not represent or reflect the views of RTÉ.
