For most people, divorce or the dissolution of a civil partnership would feature highly on a list of life events that impact both individual’s finances. In reality, divorce doesn’t always occur immediately, with couples often being ‘separated’ for long periods of time before formalities are pursued.
Lots of people and organisations can talk you through how to handle the division of finances during divorce – but few can go into as much detail with separation. Here are some vital considerations if you’ve decided to separate, but haven’t yet moved toward divorce:
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Shared in marriage means shared in separation
Although the two people concerned might have verbal agreements in place that relate to finances and living arrangements, until the formality of divorce proceedings nothing can be taken for granted. This can raise a number of important questions spanning numerous life areas:
- Who will pay a mortgage or rent?
- Who pays for household bills?
- Who will live in the family home?
- What happens to debt that has been accrued together?
- Who takes control of savings and investments?
- What happens with shared assets, goods and property?
- Is any child maintenance to be paid?
- With whom with children live?
- How is visitation of children arranged?
There are no hard and fast answers to these questions – but it’s important to recognise that there could well be expectation from the other person involved.
Being careful with how these questions are handled is important. In separation, you’re essentially trusting the other person involved to maintain your best interests, despite the breakdown in relationship.
Lucy and John are married and rent a flat together. They amicably decide to separate and John continues to live in the flat. When John loses his job, he is unable to pay the rent so moves in with his parents. Lucy, having rented a new flat, is now required to pay two amounts of rent or be subject to potential joint legal action from her previous landlord.
The right to access the home
When a couple separate it would ordinarily involve one partner moving out of the shared home. What is often overlooked is that partner’s right to have continual access to the home until divorce proceedings are complete – no matter how long that takes.
The law states that the locks cannot be changed by the remaining partner, so legally speaking, there would be nothing stopping the other partner accessing the house 24 hours a day.
While an amicable separation agreement would mean this situation is unlikely, if a partner were to decide it appropriate, only a divorce or a legal injunction could stop it from occurring.
Money and goods accrued after separation
While separation might represent the end of the relationship to the two people involved, legally speaking, your marriage or civil partnership remains in place. This means the acquisition of wealth, goods or property beyond separation is effectively the same as accruing those things during your time together.
So, if one person leaves the family home and buys a property during the separation period, that property would be taken into consideration upon the commencement of the legal proceedings of divorce. It might seem obvious when viewed objectively, but in the haste that surrounds separation and re-establishment of life, this can be overlooked.
It’s not just property that falls into this trap either, increases in earnings, savings accrued, goods purchased and money inherited while separated are all taken into account.
Chris and Anthony separate after 3 years of civil partnership. In the coming years, Chris receives a promotion and saves enough money for a deposit on a house. Upon the commencement of dissolution proceedings, with no agreed separation date, Anthony cites an entitlement to the money Chris has saved.
Think about timescales involved
When the term ‘separation’ is used people are inclined to think of a short-term arrangement – but this is often not the case. There are no official figures relating to time people remain in a ‘separated’ state, but it is not uncommon for the time before divorce to stretch to numbers of years.
When you think of separation as being a state of a relationship that can last years, considering changes to your financial picture throughout that time becomes very important.
Arrangements beyond death
When separation continues for a prolonged period, financial proceedings can sometimes require arrangements relating to the death of one party. This situation is infinitely more complicated if the separated individual dies without having made a will – as the rules of ‘intestacy’ apply.
Under the rules of ‘intestacy’ only married or civil partners and a select few other close relatives can inherit. This makes a situation legally complex and very sensitive, especially if a separated individual has a new partner or family.
Ian and Louise marry and informally separate after a short time together. Both live entirely independent lives for the next 10 years, during which Louise meets a new partner. Louise passes away unexpectedly without having made a will. Under the rules of intestacy, Ian is named as inheriting Louise’s estate.
So how can you stay protected?
There are situations where divorce or dissolution isn’t an option that the individuals involved want to explore. There are also instances where it can be financially beneficial to remain married – but it is appropriate that a couple separate. In some cases, a separation could appear resolution enough, especially if done amicably.
If separation is the approach that you plan to take, especially for a prolonged period, experts suggest drawing up legal agreements that cement each individual’s position in relation to the questions and situations posed here.
It is not uncommon for separation to happen quickly or without planning – often with money as the last thing on your mind. It can also be tempting to put your head in the sand and hope for the best, rather than exploring legal options. Be warned though, no matter how the situation currently appears, if you don’t make arrangements or decisions, you leave yourself open to the possibility that someone else is going to make them for you.