Dividing assets when separating
Tuesday, November 29, 2022
Tuesday, November 29, 2022
When a couple separates, they face an automatic increased cost of living as they have to run two homes. This can be challenging at the best of times but particularly now in the midst of a cost of living crisis.
Every divorce settlement is different. There are no rigid rules as to how the assets will be divided. Any financial settlement needs to meet both parties’ needs, and the needs of any children, which means not all assets will necessarily be shared 50/50.
With climbing interest rates and soaring utility bills, how are separating couples dividing their assets ?
Our former client, Francesca, shares with us how her and her (now ex) husband managed.
Francesca’ story ….
“My husband wanted to stay in the family home and he offered to buy out my share. So I needed to find somewhere to live.
I assumed I would have a good mortgage borrowing capacity based on my salary. I was rather set back to discover that, as consequence of the cost of living crisis, my affordability was much lower than I had expected. I needed a substantial deposit to enable me to purchase a property that would be suitable for myself and the children.
We had exhausted our savings at the outset of the cost of living crisis, when my husband unexpectedly found himself unemployed. We had also amassed some debts on which we were paying a lot of interest. Thankfully my husband had recently secured a new job and he was now earning significantly more than me.
So we agreed that my husband would remortgage the family home in his sole name. He would borrow enough to pay me a lump sum that I could use as a deposit on a property. He also borrowed enough to enable us to discharge our martial debts.
The amount he borrowed represented far more than 50% of the equity in the family home. So whilst not a 50/50 split it enabled us both to have a property, with the assistance of a mortgage, and otherwise be debt-free.
As I had, in effect, received more of the equity in the family home, I offset this against my husband’s pension. I received a reduced share of his pension. A pension expert helped us with this to ensure it was fair.
Taking on a property in my own right meant I had shortfall between my future income and my outgoings. To bridge the gap my husband shall be paying me maintenance each month for the next 3 years. Following which I expect I shall be financially independent.
The maintenance my husband pays to me will be index linked meaning it will change with inflation and the cost of living. This has given me the necessary reassurances that, in the event the financial crisis worsens, I shall still be able to pay the bills !”
In our next blog we look at how the cost of living crisis is impacting upon maintenance payments and what to do if these payments have been unaffordable or insufficient.
If you need any personal guidance with regards to any issues regarding separation or divorce, contact our friendly and supportive Family Law team in the strictest of confidence on 0191 232 8451 or email email@example.com