In a recent Twitter poll from Martin Lewis CBE, more than 80% of 40,000 people said that in their long term relationships, one partner dominated looking after the finances, and in half of those couples, they do all of it.
As Martin goes on to point out in the corresponding Money Saving Expert article this kind of arrangement can be disastrous for couples hit by one of the ‘three Ds: death, divorce or dementia’, meaning the remaining partner can be left ‘inexperienced and ill-equipped for a solo financial future.’
If you are married or indeed if you’re embarking on a new relationship following a divorce, Martin has some tips to ensure both partners are clued up:
1) Sit down to do a beginner’s briefing on the family finances for the partner who is not used to being involved
2) Create (and maintain) a financial factsheet listing all product providers, from roadside recovery to investments, boiler cover to bank accounts
3) Arrange a ‘kitchen table briefing’ where you update the list and discuss the latest changes, priorities and choices
Another potential by-product of this kind of sharing of information during the relationship is that it can give both parties more of a stake in financial decisions, which in turn could lead to less bitterness if sadly the relationship does end: where otherwise one party could feel resentment towards the other party for taking a share of what they may be more likely to view as ‘their’ money.
Whereas death or dementia can leave the person left to pick up the finances with extra stress and anxiety, divorce can mean they are left unclear on where they stand financially, and even vulnerable to being short-changed when assets are split. Where one party hasn’t been closely involved with the finances during the relationship this can mean they are initially relying on the honesty of their now ex-partner, who of course may have left them and made plans for a new life without them, or indeed may be the one being left and so may have an interest in making them pay.One of the first things a solicitor will help you with when working through a divorce application is setting out how financial disclosure will work, ie going through all the assets, income and outgoings of the family. This can be done informally between the spouses, as part of mediation, or via solicitor letters and ultimately court proceedings. The financial details that should be shared as part of this process include:
- Properties (and how they’re owned)
- Bank accounts, stocks, shares, & bonds
- Business interests
- Imminent inheritance
- Other belongings such as cars
- Liabilities, ie any debts
If there is still an element of trust between the two parties this can be done on a voluntary basis, which can certainly be cheaper and quicker. However, if there is hesitancy or reluctance to share this information, it might be time to move on to a more structured, court-based approach. This also has the benefit of giving a timetable to negotiations.
An example of one party using their position of power when it comes to family finances in a high net worth case, detailed here, is where the multi-millionaire businessman whose family founded Screwfix was found by the family court to have ‘given a false presentation’ of his wealth when coming to an agreement with his ex-wife. His ex was subsequently given more of the assets. Although the courts can take a dim view of anything less than ‘full and frank’ disclosure, it was of course only once the true financial picture became clear that wife was able to have her settlement amended.
Unfamiliarity with the finances can also put a party at risk of the other using up assets before a settlement is reached. Although the court does have the power to stop or put right any disposition of assets through a freezing order, again this is only possible if the other party is aware that the assets exist in the first place- and the process can be costly and stressful.
Another issue to be aware of when approaching financial disclosure is to be careful when investigating finances after a relationship breakdown. It can be illegal to gain access to your ex’s information once you have split up, and such evidence can be deemed inadmissible by a family court anyway.
If this all sounds daunting, one consequence of this information inequality within couples is that solicitors are very used to clients being in this situation. We can help to navigate you into a position where you feel much more informed and in control, for example, by checking the Land Registry for property information or Companies House to look into business interests, and by guiding you towards an approach to disclosure that works for you and your circumstances.
If you are embarking on a divorce and are concerned about your knowledge of family finances, please contact us to help you.