Your divorce needs Insurance and Financial Planning.
There is the other possibility that people don't say out loud enough, 'What if my ex stops paying or dies?'
A conversation with Jane (not her real name) Qualified in wealth management, divorce finance mediation and insurance planning in the US and UK.
The following interview is not legal or financial advice, please seek professional advice relative to your country and state.
When I mention life Insurance to people it usually activates a contagious yawn. Why would I need it? Why would I want to pay for yet another cost? I'm too young. Life is predictably unpredictable, and post divorce you no longer have the luxury of future planning together. Insurance, when set up correctly can protect your dependents from the unknown.
(If you aren't getting divorced, please consider estate planning for your dependents. Life throws curveballs when least expected)
Jane is qualified in both Finance and Insurance in the UK and USA. She talks me through some points that she considers essential to take on board the moment you decide you want a divorce.
'I'm divorced, I learnt what to expect.'
When considering or actively in a divorce there are many details to consider.
Who has control of the finances? If it's not you:
- Do you know where all the paperwork is?
- Do you have access to the paperwork? Accounts?
- Do you use a financial wealth manager? Do you have their details?
- Do you use legal advisers? Do you have their details?
- Do you have an accountant? Do you have their details?
- What is in your name? Joint accounts? Shared assets?
- User names, passwords- do you have access to them?
Where possible, do this very early on in your decision making process, before the emotions start, before tempers flare and your spouse makes it impossible for you to have access to anything. It may take time to find everything, or it may all be organised and easy for you to have access to. Whatever information you find will assist in drafting your financial agreement.
You are legally allowed to have this information.
Remember, just because someone else is in charge does not mean they know what they are doing. Document everything you find, don't save photos to the family cloud account or can be deleted remotely. You need to be careful, and if you are in an abusive environment take extra precautions to keep anything you find off-site and keep yourself safe.
You have the documentation, now what?
Interview several legal professionals, even when recommended by a colleague or friend. This does not guarantee they are the right fit for your case. Every lawyer comes with their own opinion and experience and it is imperative that you trust your legal team.
Every divorce has different nuances and you will need a professional that is proficient in your needs.
With all the financial paperwork in order, the lawyers will draw up a financial draft that is amendable until signed. Once signed it is almost impossible to overturn. Should you not agree, your case will go to court. Generally, women, or the non-breadwinners, will start at an unfair disadvantage having had little to no financial knowledge or control. They won't know what to ask or what might be considered important information to share. Your solicitor, armed with all the documentation will request information about 'omitted' documentation which legally must be answered.
You will have to dream up the questions to ask.
In the UK, before going to court, both parties are required to complete a government financial disclosure document called Form E. It is lengthy, detailed and as nerve-wracking as filling in a passport application form. If you can afford to, hire a qualified, registered financial expert to assist you in this task. They are often cheaper than lawyers and understand the intricacies of a stock portfolio or other complex investment holdings. The wealthier the client, the more intricate it might be.
Lawyers are not financial experts.
Jane suggests you utilise her services early in the process, preferably when the financial draft is in place. Jane will be able to point out what needs to be amended and importantly, what needs to be added. At the same time, she will ensure you understand the financial implications of signing the document.
Details that can be overlooked or not set up properly are;
- Life Insurance
- Health Insurance
- Tuition
- Inflation, which had been low, has now hurt many homeowners' mortgage payments.
A monthly lump sum amount can appear generous until the mortgage payments increase until the index link agreed upon no longer covers the repayments. There is the other possibility that people don't say out loud enough,
'What if my ex stops paying or dies?'
When you have dependants, you need to protect their future.
A financial agreement may be legally binding, but if your ex becomes too sick to work, or becomes unemployed, or wants to be difficult, there is little you can do besides employ a lawyer and return to court. It will cost you money, time, and stress. A Judge cannot force someone sick to return to work.
The non-bread winner is not protected.
Estate Planning.
A topic many people are uncomfortable discussing. Death is inevitable and inheritance tax unavoidable. Post divorce you will need to re-write your Will, and even though you believe your ex will care for their dependents, things change. Their Will can change without your permission. Your ex may re-marry, and or start a new family, giving them financial entitlement. Jane has many clients who have instructed her to set up a Life Insurance policy for their former family, thereby keeping the dependents cared for and the new family separate.
It can happen, and it can happen to you.
For tax efficiency, Jane explains that in the UK, Life Insurance policies have a box to tick - 'I want this in trust.' which means it is not part of their Estate, and not subject to Inheritance Tax. The US has a policy that is a little more complicated for trusts and requires a lawyer.
A misconception in society is that the breadwinning ex will continue earning the same amount of money and potentially go on to earn more. As we know too well, life is not linear, and you cannot rely on your future being financially safe. If your children are in private education, it may be advisable to take out a Critical Illness Policy, or an Unemployment Policy to cover the costs and keep the children in a stable environment.
The time to take action is before you sign the financial order.
Health insurance policies go up as we age, and starting a new policy may be expensive and require a medical that needs to be passed. If you stay on the policy, who is paying for your share? Can you guarantee your ex will make the payments? What will happen when they move on with someone else who wants to be added to the policy, demands a total separation or they don't want you in their life anymore? These issues need to be addressed.
Insurance clauses need to be robust in the financial order.
Pensions
The UK and US allow you to remain on the pension. Where you can split or transfer, Jane recommends you take the transfer for a cleaner break and start to take control of your future. She has witnessed a pattern where the ex becomes indifferent over time and no longer wishes to be responsible. They need a clean break too. Another option, should you prefer to not split or transfer the pension, is to ask for more cash upfront to invest or use as you wish.
Jane has worked with many female clients who start off unsophisticated in finance, and over time become more than capable, independent and happier. Women are sold as less risk-averse, but Jane has seen that women have been busy doing everything else and haven't had the time to learn or take on the financial space.
Jane's TLDR
I don't think insurance features enough in settlements to back up orders that are quite easy to get out of and aren't enforceable. Policies such as Health, Life, and Critical Illness must be addressed. The splitting of finances is also not ideal, leading to frustration and arguments over costs over time.
Financial ignorance often leads people to court.
If you want to connect with 'Jane', email me at contact@angryexwife.com
This is not a paid advertisement or endorsement of their services, but for regulatory reasons cannot be named here.
HM Courts & Tribunals Service
If you want to share your story or you are a professional who wants to share some insights please email me at contact@angryexwife.com
