Divorce: Seven questions you need to ask
As sad as it is, alongside starting a new diet, January is also the peak time to sort out unwanted relationships.
The number of divorces in England and Wales rose by 4.9% in 2010 to 119,589 - the first annual increase in eight years. The Office for National Statistics said the increase may be linked to the financial downturn. "The figures show that divorce rates continued their downward trend during 2008 and 2009 but increased in 2010," its report said.
"This could be consistent with the theory that recession is associated with an increased risk of divorce, but with a delayed impact, perhaps reflecting a couple's wait for an economic recovery to lift the value of their assets or the time lag between separation and obtaining a decree absolute."
But, whatever your reason for divorce, it's important to understand the financial implications.
Q: How much does divorce cost?
Arranging the paperwork to end a marriage is relatively inexpensive. You'll pay £340 to issue the divorce petition; between £5 and £7 for the affidavit; and a further £45 for the decree absolute. A solicitor can help you with the paperwork and many charge a flat fee of around £500 on top of the court costs.
If your case isn't straightforward and you need additional advice charges will increase. Simon Gledhill, head of family law at Napthens solicitors, explains: "If you need mediation expect the additional costs to be between £1,000 and £2,000, while if you go to court, your costs could be between £3,000 and £10,000 per person."
Q: How will everything be divided?
As a starting point, and regardless of who brought what into the marriage, the legal position is to split everything 50:50. Debra Emery, partner and head of family law at Moore Blatch, says that divorcing couples can often agree on a different split, for example, if one is taking the children or the marriage has only lasted a short time.
Q: What happens to our home?
The family home can be a tricky asset to divide and sometimes the easiest solution is to sell it so each party can move on. However, where children are involved, a Mesher order can be granted. This is a court order that will postpone the sale of the home until a certain trigger point such as the child reaching 18 or the ex-spouse remarrying.
It's not ideal though as it can just delay a house purchasing problem for the parent who remains in the property. It can also cause tax problems for the parent who moves out, as Mike Fleming, director of taxation at Straughans Chartered Accountants and Tax Advisers, explains: "If they buy another house, the family home will cease to be their principal private residence and they could be liable for capital gains tax when it's sold."
Q: Will pensions be taken into account?
Yes. Pensions are treated just like other assets and there are several options. If your ex has one and you don't, there are ways to claim your share. If there are other assets available it may be possible to offset it.
If not, you could consider pension earmarking, where part of your ex-spouse's pension and tax-free cash will be paid to you when they retire, or for greater flexibility a pension sharing order.
Q: The kids are going to live with me. What maintenance can I expect from my ex?
How much child maintenance you'll receive is determined by the Child Support Agency.
Non-resident parents are required to pay a percentage of their net pay based on the number of children, how often they spend time with them and whether they have other children living with them. As an example, they'd pay 15% if they had one child, 20% for two, and 25% for three or more.
Q: I gave up my career to bring up the kids. Can I claim for spousal maintenance?
Yes, although, unlike child maintenance, there isn't a simple calculation to follow. "The court line is that maintenance should be based on reasonable needs generously interpreted," says Emery. "In practice, the spouse seeking maintenance will put together an income needs schedule alongside details of their own income.
If there's a shortfall, and their former spouse has surplus income, a maintenance order will be agreed." This can be for a set period or indefinitely.
It's also important to note that payments will stop if you remarry and could be reassessed if you live with someone.
Q: I'm in a civil partnership. What happens if I want out?
Although there are a few differences - for instance adultery can't be cited as grounds for dissolving a civil partnership - the process works in the same way as a divorce.
Capital gains tax
If you buy an asset – shares, a second home, arts and antiques – and then sell it at a later date and make a profit, that profit could be subject to CGT. You don’t pay CGT on selling your main home (which is why MPs “flipped” theirs so regularly) or any securities sheltered in an ISA. Individuals get an annual CGT allowance (£10,600 in 2010/2011) but if you have substantial assets it’s worth paying an accountant to sort it for you.