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Sometimes, sadly, relationships come to an end and some people may need to find ways to mitigate the financial impact of divorce or dissolution.
Even in the best of circumstances, break ups are incredibly tough, confusing and stressful times. And, when a marriage or partnership comes to an end – when finances, lives and living situations are all intertwined – this is even more so.
However, it’s important in these situations to act quickly and protect yourself and your finances against the financial impact of divorce or dissolution.
If you both own your house (or you live in a house that one of you owns), protect your rights
Your first course of action to mitigate the financial impact of divorce or dissolution should be to protect your interest in (and rights to) the house. If you both own the house, both of your names should be on the deeds, but it’s important to note down whether you are joint tenants or tenants in common.
The difference is slight, but important: joint tenants own 100% of the property together, as a couple, while tenants in common own a share of the property, this can be 50% of the property each or another percentage.
If you’re not sure whether you signed up to own 50% of the house or to own all of it jointly, then it’s a good idea to check straight away. For £3, you can check online at the Land Registry website – if your house is owned as tenants in common, it will have the words ‘Form A restriction’ next to the ownership information. If you can’t see that, then you’re joint tenants.
Dealing with the financial impact of divorce or dissolution: Consider switching from joint tenants to tenants in common
At this stage, many couples choose to switch from joint tenants to tenants in common, even prior to the separation proceedings. Especially for acrimonious splits, the switch to tenants in common prevents the entirety of the house being passed over to the partner in the event of the other partner dying before the divorce or dissolution proceedings are finished.
If you want to do this, the process is incredibly simple and can help you to deal with the financial impact of divorce or dissolution in a simpler way. There are some simple steps to follow. All you have to do is write to your partner and inform them that you want to sever the joint tenancy – and your partner cannot fight it. You can even use this form to do so.
If your ex-partner is the sole owner of the house that you both lived in, then you can register your interest in the house so that you are informed if the house is remortgaged or sold without being told. However, unfortunately, it doesn’t guarantee you any rights to the property.
Make sure that you inform your mortgage provider
If both of your names are on the mortgage, it’s probably a good idea to speak to your mortgage provider to discuss what is happening and how you’re going to keep up with the mortgage repayments. It’s important to clearly understand the financial impact of divorce or dissolution on this.
Even though you’ve split up, if you have a joint mortgage, you’re both equally liable for the whole mortgage – not half each. That means that if – for whatever reason – your ex-partner can’t make their percentage of contributions to the mortgage, then you’re responsible for the remaining amount. (Not keeping up with your mortgage payments could damage your credit rating and make it more difficult to borrow in the future.)
If you rent, speak to your landlord straight away
It usually best to let your landlord know straight away what is going on – and then you can begin to deal with the financial impact of divorce or dissolution and come to a solution between you.
Much like owning a house, much of who has the right to stay in the property is dependent on what kind of rental agreement you have with your landlord. (For more advice on rental agreements, check out our article about tenancy agreements.)
- If the tenancy agreement is in your name, then you have the right to remain in the property when your partner moves out. However, you also have a responsibility to cover all of the rent.
- If the tenancy agreement is in your partner’s name, then you have the right to continue living in your house all of the time that you’re still married or in a civil partnership. (The same holds true for your partner if the tenancy agreement is in your name.)
- If you are joint tenants then you both have the right to carry on living in the property. Of course, either (or both) of you can give your notice to the landlord to end the tenancy and move out – either immediately or at the end of the fixed term. The exact rules depend on the type of joint-tenancy agreement you have – you may be able to negotiate with your landlord for one of you to continue living there after the tenancy runs out or after the marriage or civil partnership ends.
Bamboo Top Tip:
Although it’s an incredibly stressful time, if you rent, make sure to prioritise rental payments. Whatever your tenancy status, you could end up being responsible for the rent if your ex-partner can’t (or doesn’t) pay – which could lead to eviction. It’s a good idea to make sure that you have some money – and a plan in place – for this possibility. If you’re struggling with rent or worried about eviction – speak to Citizen’s Advice.
Mitigate the financial impact of divorce or dissolution by sorting out joint bank accounts
As with everything in the separation process, the best way to handle this is to have a discussion with your ex-partner and come to an agreement on how to deal with the financial impact of divorce or dissolution. However, in some cases, this is a lot easier said than done.
If you think that your partner might run up debts or spend all of the money in a joint bank account, it is important to act quickly and prevent this from happening. If it is a joint account and your partner runs up debts or goes into the overdraft, then you may be responsible for paying back this debt.
Contact your bank and let them know the change of circumstances
In this situation, it’s a good idea to change the way that the account has been set up. A lot of the changes you make will be based on your individual situation, your relationship with your ex and whether you think that they may be irresponsible with the money in the account.
At the most basic, you can put in place measures that mean that both you and your ex have to agree and approve any activity on the account that directly affects you both. (For example, increasing the overdraft or reducing the overdraft limit or withdrawing sums of money.)
At this time, it’s also prudent to switch any of your sole income into a separate bank account that is in your name only. This will prevent your partner from having any immediate use of this money – and lessen the potential financial impact of the divorce.
Remember, closing or freezing your account should always be the last resort
Closing the account – or freezing it – may seem like a quick fix to the difficulties of this situation, but it can actually make life very difficult.
If you want to freeze the account – perhaps because you’re worried that your ex will withdraw or spend all of the money – then it is important to remember that this will prevent Direct Debits, standing orders and regular payments from being made too. This may lead to missed payments and they will directly affect your credit score. (On top of that, while one of you can have it frozen, it normally takes both parties to ‘unfreeze’ it.)
Similarly, for closing the account, it’s important to consider any regular payments and Direct Debits that come out of it before you close it, how you’re going to divide the money that is in the account or – if you both have an overdraft – how you’re going to clear it. (You can’t close an account until you’ve cleared your overdraft.)
Deciding how to divide your joint savings
Like everything else, this process is smoothest and easiest if you can come to an agreement between you as to how to split up savings. We know, however, that’s not always possible. It might be worth considering using a mediator to keep this process as clean as possible and to come to an amicable decision, as your rights to the money differ depending on where in the UK you live.
In England and Wales, the money in joint savings is considered to belong equally to both of you. In this case, the usual process is to split it down the middle.
However, in Scotland and Ireland, it is assumed that the money held in a joint account belongs to the person who paid it in unless it can be shown that it was intended to be held jointly. This rule applies whether the joint account holders are married, in a civil partnership or living together.
Finally, prepare yourself for financial independence
The process of going through a divorce or dissolution is stressful enough, without having to add the additional day-to-day money worries.
Once you’ve protected your interests and rights to your joint assets, it can be a great idea to focus on how you’re going to be independent in the future. This can be anything from increasing the number of hours you work or – if you were a housewife or househusband during your marriage – restarting your career and finding a new job.
It’s important to realise that a number of things are now going to be more expensive (as you won’t be splitting the cost) and it’s a good idea to plan ahead for these so they don’t surprise you and eat a big chunk of your savings.
One of the biggest financial impacts of the divorce is learning to live to your own means, rather than living to your joint means – it’s best to be prepared for this.
Plus, it’s much easier to handle the emotional impact of a divorce if you’re not constantly stressing about all of the little details like affording the food shop or how you’re going to pay the bills and rent.
Looking for a loan?
If you are going through a divorce or dissolution at the moment, it’s important to prepare for the financial impact by being careful with your money. Our blog is full of tips on frugal living, and there are lots of great ways to save or make a few extra pennies, which will be incredibly useful over the coming months.
However, if you need a bit more of an extra hand with the cost of adjusting to this massive lifestyle change, then we’re here to help. You can borrow anywhere between £1,000 and £8,000 from Bamboo and – thanks to our quick online application, subject to checks – the money can be in your account within 24 hours. Representative 49,7% APR. A guarantee may be required.
- Author Jack Barclay
- Posted 12 October 2016