Divorce: how can I protect myself financially?

Divorce is a costly experience - both emotionally and financially. Family lawyer Philippa Pearson and author of the 'Separation & DIY Divorce Kit' and 'Living Together - An Essential Legal Guide', outlines the only way you can save money during a divorce - through effective mediation.

Divorce law in England and Wales requires both parties to tell the absolute truth about their financial circumstances and there can be dire consequences if they don't - usually the offending person is made to pay more in money and property to their ex-spouse, as well as being ordered to pay all of the divorce costs (which can be considerable).

Although it can be possible to protect yourself to a certain extent (financially speaking) upon divorce, you are not allowed to hide assets and income by fibbing about what you have. The divorce court also doesn't ignore assets and income held by third parties as a matter of convenience (whether at home or abroad). The general rule is that all assets and income, in whatever manner they are held and wherever, are put into the 'melting pot' and are seen as available for the divorce court to redistribute between the couple upon divorce.

Divorce law is littered with cases of people trying to hide their assets and income in thousands of ingenious ways. The majority are unsuccessful - even offshore trusts and companies hold no sway with the divorce courts, which take a much more realistic view of ownership than, for instance, the Inland Revenue.

Also, a spouse who has tried to protect their money using tax-avoidance schemes (such as a trust) will not necessarily have the divorce court's backing. To the contrary, the divorce court may not view the money to be an arms-length asset and it will be open to redistribution in the other spouse's favour. Before embarking upon any exercise designed to put your wealth out of the reach of your spouse, take good legal advice or you may end up paying more than you would have done before you attempted to protect yourself.

So-called 'simple' ways of keeping assets from your spouse - such as placing assets in your sole name - also don't really work as all the assets belonging to both spouses are taken into account by the divorce court. Putting all of the assets into joint names also doesn't help and it may even make matters worse if the judge takes the view that unless there is evidence to the contrary, assets passed from one spouse to another are considered a gift and stay that way.

The only way you can really protect yourself financially upon divorce is to avoid a big contested financial battle through the lawyers and the courts so that you avoid the big legal fees that such litigation always entails. (Sir Paul will no doubt vouch for the huge divorce costs that can be incurred in such circumstances.)

The best way to avoid such a battle is to reach an agreement between the two of you in the divorce. Forget about the rest: the legal forms, the divorce lawyers, the divorce law and the divorce court.Your divorce is actually about you and your partner. So get talking!

If you can't do this over the kitchen table, then try mediation or, failing that, collaborative law, where the parties agree in writing to reach a settlement without going to divorce court. Both are tried and tested methods of reaching settlements with the minimum of divorce lawyer and divorce court intervention. They are cheap (relatively) and they avoid the unpleasantness which inevitably accompanies contested divorces.

For more information, contact Resolution, or take a look at Lawpack's Separation & DIY Divorce Kit which provides hundreds more tips on how you can handle your own quickie divorce and save legal fees and heartache.

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Published on: November 2, 2009

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