Financial Planning for Divorce – Preparing, Protecting and Planning Ahead

Over the years, I’ve helped many individuals and couples plan their finances during divorce, guiding them through a time that can feel deeply unsettling..

As you move through the divorce process, understanding your financial position early on is a good idea, especially as decisions around the division of assets – from the family home to the pension fund – can feel overwhelming.

According to University Hospitals, The Science of Health Study, divorce is in the top five of the most stressful life events, only second to the death of a loved one.

Why Preparation Matters During Divorce

I recently joined Hellen Cankett, Partner at Cheltenham-based solicitors BPE, as an expert divorce financial planner to record a podcast highlighting what divorcing and separating couples should consider when embarking on this journey – from working with a family law solicitor to understanding the role of court orders such as consent order or pension sharing order.

In my experience, preparing emotionally and in a practical way helps you stay grounded and ultimately saves time and potentially professional fees. But you shouldn’t do this alone; you will need a good team to support you, particularly as every couple’s personal circumstances and financial situation is different.

Understanding the Components of Your Wealth

Before you see a professional such as a lawyer or financial planner, you will get more out of the meeting if you have an idea of what the various components of your wealth are made up of. This includes understanding assets in divorce from property, savings and investments, and pension funds through to business interests. Even without exact values, an overview ensures you make the most of an initial meeting and provides a helpful starting point for discussions.

Gathering Key Financial Information

Keeping communication going is challenging, but I encourage you to try. Gather statements for pension funds, savings, investments and insurances. Most people have a rough idea of property values (Rightmove can help).

It is important to remember that the way you divide assets can impact on any capital gains tax, depending on what is transferred and at what point in the process.

If a business is part of the assets, you may need a specialist, for example as single joint expert, to value it later in the process.

Why Financial Clarity Reduces Conflict

Money is one of the biggest areas of conflict in divorce. Understanding your numbers is empowering and promotes confident decision-making.

I’ve worked with many individuals who initially had little interest or understanding of their finances, but working through a financial planning process helps promote more confident decisions leading to a more grounded financial future.

Planning Ahead: Understanding Post-Divorce Needs

It isn’t easy to envisage your future needs, but it’s a crucial part of planning. This is where tailored financial advice helps align decisions with your personal circumstances, whether you’re considering housing, income, future lump sums, or the long-term impact of court orders for a clean break. I have helped people create a vision of life beyond divorce and trust me, there is one.

Using Cashflow Forecasting to Model Future Outcomes

Once your financial landscape is established and needs considered, we create a cashflow forecast using agreed assumptions. These include income, expenditure, lump sums, inflation and long-term growth returns for assets such as pensions, investments and property.

All assumptions must be clear, well-reasoned and realistic.

Being prepared reduces uncertainty during an emotionally challenging time.

My top tips are:

• Understand your numbers
• Create a vision of the future
• Surround yourself with experts you trust

My overarching advice: don’t do it alone. Choose professionals who are the right fit, with the experience and skills to guide you.

You can listen to the full divorce financial planning podcast.