Split your differences

So much for the season of goodwill, January tends to be the busiest time of the year for divorce lawyers as couples crack under the strain of Christmas and increased debt burdens. Though divorce rates have fallen slightly over the past few years, Norwich Union reported last month that the cost of divorce has doubled in only three years, with failed marriages now costing a total of £4.3billion a year.

The cost of the average divorce is now £28,000 per couple, up from about £13,000 in ten years ago, thanks partly to the rising cost of purchasing a new property. And it appears that divorce has long-term implications for your financial health: The Office of National Statistics says that divorcees pay a higher proportion of their incomes servicing debt than any other group.

Although it sounds deeply unromantic, it is wise to consider the financial implications of a relationship breaking down early. A good starting point is to ensure that both parties are well informed about the state of their finances. It is advisable to ensure that neither has a complete free reign over the family finances. Moreover there are practical steps that can be taken to ensure that the pain of splitting up is not exacerbated by financial difficulties.

For example, the family home should be held in both spouses’ names either as joint tenants or tenants in common. While the home would be considered part of the matrimonial assets whether or not it is in joint names, it is only if the house is in joint names that one spouse will be protected automatically against the other selling or mortgaging the property without consent.

If the property is in one spouse’s name only on breakdown of marriage, the other partner should apply to register his or her matrimonial home rights with the Land Registry as soon as possible.

Some financial products, such as current account mortgages, are best avoided. There is nothing to prevent one party drawing large sums on the loan facility without reference to the other. It is often too late to do anything once the money has been spent.

Joint accounts are another area where couples need to be wary. While they are useful for shared spending on monthly bills, it is a mistake to pool all your funds in a single account. Once a split occurs, you should tell your solicitor that you have a join account. In most cases banks will block a joint account if one party informs the bank that the account is no longer needed, but this is not always the case – some require a court order.

When relationships do break down, it is possible to reduce costs by trying to decide as much as you can without lawyers. In most cases, it is the division of assets that provides the main obstacle to amicable settlements.

Couples having difficulty dividing their possessions should seek mediation. The alternative – going to court – is not just expensive, but may seem unfair to many. There are no firm rules on how assets are divided, though a number of factors may be considered, including the welfare of any children, the financial needs of both parties, the length of the marriage and, in some cases, the existence of a prenuptial agreement. There is no assumption that nay thing you owned prior to the marriage – or inherited during the marriage – will remain yours automatically. Potentially everything is up for grabs.

In the case of family businesses, the courts will establish a value for the parties’ interests in the business and decide how that should be reflected in the final distribution of assets. The court would not make an order that would result in one spouse losing his or her livelihood – for example, by forcing them to sell the business. If the other spouse’s contribution to a business should be recognised, this could be done in some other way, such as giving a greater share in other assets or by ordering a lump-sum payment by instalments.

Prenuptial agreements are still not legally binding in England and Wales, but those planning to marry should consider having one drawn up. Prenups are considered as one of the circumstances of the case upon marriage breakdown. The courts are attaching more weight to those that are carefully drafted, signed in good time before the marriage and where both parties have had the benefit of legal advice.

William Montgomery is a regular contributor to television and radio on all aspects of leadership excellence. To find how he can help you and your business, please call his office on +44 333 666 1010.