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Be Aware of the Economics of Divorce.
We should warn you that on this page we deal with some X-rated issues:
The Winner Takes it All..., commented fearsome Swedish pop foursome Abba, about the cruelty of divorce. A few years before that track, they sang Money, Money, Money, apparently oblivious to the fact they were all heading for the divorce courts to decide how to split their assets.
50% of all marriages in Britain now end in divorce. That's nearly half of them. So, planning ahead, maybe with a view to minimising any potential legal costs, at the start rather than the end of the marriage seems very sensible, even though it could burst a few romance-balloons.
A joint bank account sounds romantic but can be the source of endless arguments. Some suggest having a joint account with two separate individual accounts, from which agreed contributions can be made to pay for bills. Also, if one partner runs off with the money, the other one can simply advise the bank and close down the joint account, while at the same time reorganising regular payments.
With credit cards, joint accounts are not recommended, from the viewpoint of crisis management. If the worst happens and one partner disappears leaving a trail of debts, or one partner becomes a compulsive shoe shopper, it's their debt, not anyone else's. And rightly so. Same with single-signature shared savings deposit accounts, in that they are too easy to be plundered by a disaffected partner. Individual is best. Especially the Individual Savings Account, or ISA, which should pay excellent (tax-free) interest.
Life Assurance, is cheaper joint than single, however, raplacing it after a split with a single policy might be expensive. An alternative is to get separate policies at the start, or to avoid life assurance altogether if decide that you have no dependants.
Pension funds can be split when couples divorce. Even if the pension isn't split as part of the divorce agreement, it should be taken into account when totting-up the shared assets. Stakeholder pensions allow non-working, ex-partners for example, to carry on contributing, with tax-benefits, using maintenance payments perhaps. Death benefits, in fact any agreement allocating payments upon death to the next of kin which is probably the ex-partner, should be reviewed.
Besides the children, this is probably the biggest source of arguments in divorces. Until it is settled, both parties are liable for keeping-up mortgage payments. It is worthwhile keeping in touch with the mortgager regularly until settlement. A divorce does not annul a will, and having your ex as executor may be undesirable, to say the least. A new will is a must, after a divorce.
So be prepared. Married people are the only ones who can divorce. To avoid a financial disaster from a divorce, think carefully before you say "Take a Chance on Me" like Abba did. First stop, check out the free "pre-nuptial" agreements out there on the Internet. They are very scarce but here's an obscured free pre-nup form to give you a flavour. Bear in mind that Pr-nups are only just being used in evidence in divorce trials and don't as yet have a legal status in the UK. Looking back, that free agreement could be the best bargain you'll get from the Internet, after those fiendishly clever Money Surgery tactics of-course.
See our page on understanding unmarried couple's splitting, here.
Just a Thought on... Divorce
(16:00 Sunday 10th July 2005 news story)
This is the first of a series of Just a Thoughts that we'll occasionally drop into Money News. The first subject: D.I.V.O.R.C.E. (which spells money hell).
We promise to devote a forthcoming page (this is it) to Divorce but in the meantime...
Married people are the unluckiest people in the world, because they, and only they, can get divorced.
Just a thought.
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