Why you need a formal divorce
Yes divorce may be very emotional, financially awkward and stressful but separating without the formality of divorce can be financially disastrous.
A recent case involving a couple that were married in 1989 for only three weeks. They then split and became estranged. The husband died in 2011 – the wife discovered this in 2016 when she hired investigators – a dispute has resulted over her claim to some of the estate.
A judge ruled that as they were still married when the husband died she could indeed have a claim.
Lawyers say the case highlights one of many dangers financial dangers of an informal separation.
The Home – things you should know
Something that many people overlook or are unaware of, is that both parties have a right to live in the house they shared after separation.
If one person moves out, they are allowed to come back and are free to stay when they choose. The partner who stays in the house is not allowed to change the locks. The only way to remove this right is through formal divorce or an injunction.
Shared accounts, debts and assets
If you are separated you should be aware that, your finances remain linked until you divorce.
Spouses or civil partners jointly responsible for a mortgage will both be at risk if one party moves out and stops paying their share. If the payments stop the house could be repossessed and both will see their credit rating damaged.
If one person wants to buy a new home, whilst still being a party on the former family home, they will have to pay the 3% levy for second homes, unless they are divorced.
Access to joint bank accounts or shared credit cards will also continue unless the provider is notified.
When told about the separation, a bank is able to freeze the funds in the account until the next steps are discussed. The lead holder of any credit card can ask for the second party to be removed or request the card be cancelled.
There are also consequences concerning assets built up or eroded after separation, prior to divorce.
If one party goes wild with their spending and significantly diminishes their assets over a number of years, their spouse may be ordered to assist them in rebuilding their finances when divorce settlements are reached.
A man is currently fighting an appeal in such a case – a court ordered him to pay increased income to his former wife, 13 years after their divorce and split of capital assets.
It heard how she had made “poor financial decisions” through a series of “unwise” property purchases, and had spent all her money. He is attempting to raise money to further challenge the decision
If one person increases their wealth or builds up their business during the period after separation, this will have to be disclosed when the divorce proceedings take place.
This wealth is referred to as “post-separation accrual” and may not form part of the settlement, unless the court decides the other party is in need.
An individual has the right to claim against the estate of their spouse or civil partner even if separated and could demand a continuing income in addition to a slice of the capital.
It is, of course, essential to make a will. If you have an estranged spouse you can use it to explain why the ex should not be a beneficiary. It may be that you have a new partner or family or other dependents that you want to leave your estate to.
Hopefully you can see that just separating, regardless of how amicable it may be, will not provide you with certainty. If the relationship is definitely over then draw a line in the sand, finalise the connection formally before moving on and allow both of you to start your new lives.