How to Prepare Financially for Divorce

Today I’m really delighted to be joined by Tamsin Caine from Smart Divorce to talk about how to prepare financially for divorce. Tamsin and I have known each other for a number of years now. She also runs an amazing podcast that’s very much centred and focused about helping people through divorce and how to prepare financially for divorce.

This is a really interesting topic and one that I want to dive into. We have spoken about how to manage money and the emotions around money, particularly when dealing with a financial transition such as divorce, before on the podcast. But I think it’s one of those topics that does need re-looking at because with divorce work especially, there’s so much that goes on emotionally, physically, and mentally when it comes to managing money and everything else surrounding that. This is Tamsin’s area of expertise on the podcast today.

So welcome, Tamsin, how are you?

I’m good. Thank you. Thank you for inviting me to come on to the podcast. I’m really excited about talking to you.

You’re so welcome. Thank you so much for joining us. As I mentioned in the introduction, Tamsin is a chartered financial planner, which is pretty much the highest you can get in terms of qualifications. She’s been in the industry for over 20 years, so she knows her stuff.

I wanted Tamsin to come on and talk about her own experience of going through divorce and then actually talking about what is the best way for us, as women, to manage our emotions and the money side when we’re going through a divorce.

Tamsin, for those listeners who haven’t come across your podcast and your work before, could you give us a little bit of an idea as to the sort of work that you do and how you help women who are going through divorce?

Yeah, of course. I work with both couples and individuals to help them to figure out how to divide their money from their marriage, to come up with an amicable settlement with their ex partners, or soon to be ex partners.

I tend to work with parents because the really important thing is if you’re going to co-parent together, you decided to have those children with your partner and you need to co-parent them, let’s be honest, for the rest of their life. I don’t know about you, but my parents are definitely still parenting me at the age of 47!

The idea is that whatever happens, you can be in the same room with that person and not be frightened of it. Sorting out the finances, is a massive fear when you go through separation and divorce. We do also help couples who are going through desolation of a civil partnership as well. It doesn’t have to be different sex couples. It can be same-sex couples as well.

That’s a great point. Thank you. How did you get into this work in the first place?

That’s a good question. I got divorced about five years ago and going back even further than that, I am a child of divorced parents. My parents split up when I was about 12. I still in touch with both of them but they didn’t have a great divorce. They didn’t really manage to do it amicably. They’re not really great at being in the same room together, even now 35 years on.

I didn’t want that and nor did my husband. We wanted to try and part so that we could still phone each other if we were having dramas with the children, we wanted to be able to go to parents’ evenings together. We want to be able to share the big things in our kids’ lives. If my son has a big rugby match, we want to be able to rock up together and there not be a big drama about it.

That was my experience and we came through it. Don’t get me wrong, it was not a perfect experience. All divorces are roller coasters. We both stuffed up at various points along the way, and we probably are still stuffing up at various points along the way because we are all human.

I wanted to be able to help other people to come out of their breakup in an amicable way, to be able to move forward and be able to pick the phone up to one another. It struck me that the work that I was doing as a financial planner with other clients who were planning for their futures and getting clarity and peace of mind from being able to see their future financial plans, that that would work brilliantly well for people who were going through divorce, who were suffering that initial fear, that trauma, that lack of clarity about what their future might look like. So I started Smart Divorce in 2018.

You talked there about the initial fears for people when they’re going through divorce. What are the typical fears that you see and hear from your clients when they’re going through that first initial stage of divorce?

The biggest three are;

What am I going to do for money? How am I going to manage financially? Because you’re going from one home to two homes and most people, even if they’re good with money and they put some aside, it’s still putting some aside for the future that they believe they’re going to need in the future. Very few people tend to have huge amounts of surplus money that’s just swirling around that’s able to fund another house if they needed it.
The second is where am I going to live? Most women desperately want to stay in the family home. They don’t want to move the children. Sometimes that’s the right decision and sometimes it might be that actually moving home doesn’t have as big of an impact as they think it’s going to.
The third one is, what about the children? Am I going to have them all the time? Are we going to split looking after the kids 50/50? How’s that all going to work? I don’t really want them shifting from house to house.

Those three things seem to be the things that really impact the most. In terms of those challenges then, the initial fears of, how will I manage financially? Where am I going to live? And what happens with the children?

I haven’t been through a divorce myself, but my parents divorced actually at a similar age, Tamsin, to your parents.

I would say my parents never really co-parented. It was probably more parallel parenting than it was co-parenting. Maybe we can talk about that in a moment, but with those fears about managing financially, I know that for some of you listening to this podcast, you might be thinking actually divorce or separation might be the next step, but the fear there is that I can’t because I’m financially dependent on my partner.

We’re actually going to do quite a deep dive into this subject on a future podcast episode coming very soon. We’re going to be talking about that in some detail, because I think that for me is almost a whole different challenge for people who are in relationships, who know that they want to take that next step, but don’t know how.

But in terms of those fears about once you’ve made that decision, how do I manage financially, where will I live, and what’s going to happen with the children, from your expertise, Tamsin I know that you do some close work with solicitors. What are people’s choices?

If they were to have a checklist or a list of things that need to happen over the next three or four months, what would you recommend people start thinking about in that stage?

The first thing to do is gather all the financial information that you have and that you know about, because one of the early stage processes is to exchange information with your other half.

There are various choices that you have in terms of legal separation of how to do it. You could, for example, do it yourself, you can use a mediator, you can use a family lawyer. Look out for those that are Resolution members, because Resolution encourage what they call dispute resolution without going to court if it’s not necessary. Those lawyers will try and help you to settle things out of court.

Those are the main initial options that you have about who you’re going to talk to. One of the first things to do is to exchange financial information. Gathering together all the information that you have about the financial products that you know you’ve got. So what savings accounts have you got, what investments, what pensions. Try and remember all the places that you’ve worked in the past that you might have gathered pensions from and try and pull together some of that information. That’s where we try and help people if they are not sure where to go.

The next thing to do is try and put together a budget or a spending plan. Pull together what you spend money on because that’s how we can start looking at needs. Putting together a budget or a plan when you’ve never ever done it in your life before is really, really, really tricky. If you’ve never had that experience and you have no idea where to start, we’ve got some budget planners that can help to write down what things you want to think about what you spend money on.

It’s a really good point actually, because for a lot of people, this may be the first time that they’ve ever done a recce of what they have in their finances.

It’s something we talk about a lot, in our Money Circle membership. We’ve provided these PDF money portals where they can store all of their financial information. We’ve also created things like Trello boards for people because sometimes people like to use different tools and things to help them get organized.

I think sometimes it is just having that awareness, which I think is relevant whether you’re going through divorce or not. We should really all be as aware as we possibly can about what we are spending. What are our spending habits? Not to restrict your outgoings, but actually just to create some awareness over what your spending habits are and which will essentially help you to manage money better.

You talked through there about a couple of options about going through Resolution, going through a family lawyer, etc. How does a financial plan work to support that journey?

A mediator can’t give advice. We quite often work with mediators because they can’t advise. They’re there to mediate the conversation. If you find it difficult to sit in a room and have a conversation with your ex, without it turning into a massive row or them hugely overpowering you, which can happen. A mediator is there to ensure that everybody gets a fair say and that everybody’s putting their point forward on an even keel.

We quite often support clients who are going through a mediation to educate the person who’s financially less aware and bring them up to the same level or to create a plan for them so that they can see if they separate the money in a certain way, how that’s fair.

When we look at divorce, we look at two different ways of sharing money out. One of them is called a needs basis and one is called a sharing basis. Sharing basis is very, very rare in the clients that I work with. In fact, I don’t think I’ve ever come across a sharing case. They tend to be multi-millionaire business people, footballers or people who have huge amounts of surplus money.

The majority of us normal people would divide our assets on a needs basis. So there is maybe surplus money for one house, but actually when you’re then funding two houses and two lifestyles, actually you need to split the assets so that everybody’s needs are covered. On a needs basis, you’re looking at making sure that both parties financial needs are dealt with in a fair way.

That doesn’t necessarily mean 50/50. If you’ve got one person earning £100,000 and one person earning £10,000, then splitting all the assets 50/50 is not going to be fair because one of them is going to continue to add huge amounts more. They’re going to be able to build their assets back much more quickly. They’re going to be able to achieve a mortgage much more quickly. They’re going to be able to build pension benefits up. So we need to think about all those things. That’s where we come in to help to show you what that might look like in the future. What a fair split might look like.

Certainly from my experience of financial planning work as well, one of the key things that can come up around choices is maintenance. Do I take a monthly maintenance or do I take a lump sum? That’s where the power of financial planning is incredible because visually then you can map out scenario A looks like this and scenario B looks like this.

It can be clear to then stand back and say, okay, that makes much more logical sense. Let’s go and have a further conversation about that arrangement.

You mentioned when you’re gathering data about pensions – I know from my experience in financial planning that this is one area, and this includes friends of mine that have been through separation divorce, where they’re like, I’ve not bothered looking at the pension because it’s not worth anything. They focus on the house, the physical, tangible assets.

How important is it to include those pension conversations when we’re looking at sharing or separating finances?

100% essential. In the majority of relationships, the biggest marital assets will be the house and the pensions. Man are quite possessive over their pensions. Quite often you hear women say, oh, I’m not going to touch his pension.

Well, it might be in his name, but if you’ve not worked because you’ve stayed at home to look after and bring up children or even you’ve taken a step back from your career to allow them to move forward with their career, those pensions are as much yours as they are his, even if they’re in his name. Allowing him to keep hold of his pensions and ignoring them and not even having the conversation about it is not a plan because you’re looking very short term, you’re saying I’m only going to look at what’s happening in the next five years.

But if you look longer term to your retirement, you might have to work more years because you’ve not looked at his pensions. If you think you could’ve had an extra couple of years putting your feet up and going traveling and doing nice things rather than having to work longer. It would be madness. It’s essential to look at pensions.

I'm really delighted to be joined by Tamsin Caine from Smart Divorce to talk about how to prepare financially for divorce. Tamsin and I have known each other for a number of years now. She also runs an amazing podcast that's very much centred and focused about helping people through divorce and how to prepare financially for divorce.

That includes final salary scheme arrangements because they will have a value attached to those. As Tamsin said, they can be significant.

I worked with a client two years ago and we managed to figure out that he was actually hiding a pension and we found out the information about it. She received something like £70,000 more because we really pushed back on finding out more information about this particular pension. It made quite a significant difference in terms of her own financial future.

If there’s one thing that you could take away from this podcast in terms of divorce work, please, please make sure if you ever going through those conversations, don’t dismiss the pension contributions. Don’t dismiss the historical pensions because it can make up the second biggest asset in terms of the marital assets.

Thank you for backing that up Tamsin. It’s definitely something I’m really passionate about in helping women to be more aware financially.

Absolutely. The other thing to bear in mind is you’re talking about final salary pensions before. Quite often, you’ll get what’s called a CETV, which is a cash equivalent transfer value. Often they’re not a realistic assessment of what that pension’s worth. So don’t necessarily assume that because the pension provider tells you that that’s what the pension’s worth, that’s what the overall benefits actually are worth.

I know that sounds like a bit of a bonkers thing to say, but we had a client with an NHS pension and they got a report from an actuary who can give you a correct analysis of what the pension’s actually worth. Their pension was valued at 40% of what the value of the actual assets were, and that’s hugely different.

If you’re saying, you keep your pension and I’ll have the equivalent amount in the house, for example, you could be doing yourself out of a huge amount of money. So that’s really important to look at.

The other thing to look at is state pensions. Your ex might have contributed to state pensions all the way through, and you might have years missing. Now if you’re getting child benefit those years are added. But it’s not just about child benefit, you might have years that you’ve not accumulated that your ex has. So again, really important to look at all these areas.

We’ve popped a link at the end of this article: it’s very simple to get state pension forecasts. For any of you listening to this, it’s something I always put on a financial annual checklist.

Just go to this website, put in your national insurance details, you’ll need your government gateway login, which I know is an incredible pain because it’s like Fort Knox trying to get through the HMRC website sometimes. But if you can, update that regularly.

If you think you’ve got missed years of contributions or you’re not sure, it’s a great place to get started.

So we talked there about the initial fears then of what the struggles and things and the challenges and the fears that come up for anybody going through a divorce. What other tips Tamsin, would you share with anybody that we’ve not already mentioned for people to consider when they’re going through a divorce?

I think there are a few things. Make sure you get as informed as you can. So know what your choices are, know what your options are, know where to get proper quality advice. The guy in the pub and your mate who went through divorce is not necessarily the font of all knowledge that you think they are.

Friends are brilliant and I know they try and help, but everybody’s in different situations. It’s important to take professional advice. Gather all the information together on yourself, on your policies and so on. Don’t be tempted to pinch information about your ex’s financial statements and so on. That will not do you any good in the long-term you’re not allowed to do that. Worth knowing because it’s incredibly tempting I’m sure.

So they shouldn’t go and try and find their ex’s financial information?

It will be asked for if you’re going through either mediation or if you’re using family lawyer. If the information that you’re sent by your ex you don’t believe is accurate for whatever reason, your lawyer can go back to them and say, I don’t believe this is true. I believe that X, Y, Z is missing. But you’re not allowed to go and pinch your partner’s information. So that’s worth bearing in mind.

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If you weren’t using a lawyer, because I know some people listening to this might think that using a family lawyer is really costly and can’t afford to go down that route. How else would you tackle that challenge? If you think that maybe there is some missing information, but you’re not using a lawyer?

It’s really difficult. I think the long and short of it is, if you really think that your ex isn’t disclosing accurate information, I think really your only option is to go down the legal route.

There are ways of funding divorce that you can go through that lawyers can explain to you if you can’t afford to pay for it initially yourself, and there may be options in some circumstances, particularly if the partner has withheld information, where if a court gets involved, the court may award the fees to the spouse. You might be in a position where you were awarded fees because you’ve been upfront and honest and your ex hasn’t.

It makes me think about this topic that we’re going to be talking about around financial abuse because actually it’s one of the red flags isn’t it?

If somebody is not giving accurate information or hiding money away, that can be a red flag around some financial abuse. I was just intrigued as to what you said there around, don’t try and break into their house and steal information because it will be used against you potentially.

It’s really tempting! I’ve had lots of people say, oh, well I could just photocopy X, Y, Z. Don’t do that!

I think another thing is don’t rush. It’s not a race. You don’t have to get this done as quickly as humanly possible. It’s better that you come out with the right answer rather than a really quick answer. Sometimes taking a step back, taking a breath, giving yourself some space to get your head together and to think about what the solution is better than racing to the answer.

I would definitely suggest that there’s usually one party in a divorce that’s emotionally further in front and if that’s not you, then you need to slow the process down. Just because somebody is shoving you and pushing you and jiving you and getting you to quicker doesn’t mean that you have to. You’re as in control of this process as they are.

Sometimes even getting some emotional support. On our podcast, in series two, we talk to some people who’ve been through divorce themselves and come out the other side. Both men and women actually said, we’ve come out the other side well but what we needed emotional support, some form of counselling, some form of therapist or divorce coach.

These guys are really, really helpful and I would almost say, if you don’t use them as you’re going through divorce, you will probably need them later because you have to, at some point, deal with the emotional pull and the emotional upheaval of divorce.

I would say in all honesty, the emotional support is probably the most valuable support because sometimes what happens is that the emotion is so strong that actually we just act irrationally. Not because we know that it’s right or wrong, but because the brain is flooded with emotion.

When the brain gets flooded with emotion, it can’t act in any logical capacity. So you might be thinking, I knew he had a pension, but I didn’t do anything about it because the emotion was – I just want to get it done. I just want to get it out of the way. I’m feeling pressured as you say, to get it done quickly.

I think the emotional area is so, so important to get support whether that is through counselling, therapy, coaching, because if we can manage the emotions, we’re then in a much stronger position to make more rational decisions, particularly when it comes to money.

We know that, as humans, we don’t typically come from a place of rational decisions sometimes. We know that we should be spending less than we earn, but people still get into debt. It’s because of the emotional aspect of what drives us. Also, these experiences become part of our blueprint.

Often what I find happens as well is that people who have been through significant financial transitions, like divorce, like inheritance, it’s like grief. We have to know how to manage that whole grief cycle. There’s a whole grief cycle wrapped around divorce because it’s about reconnecting with your sense of self. I think that’s so, so important to really focus on how can you be supported emotionally as well as practically.

Yeah, I think you’re absolutely right. Then the final thing that I would say is this isn’t a winning and losing scenario. You don’t want to go this thinking I’m going to win because the way to move forward with it and be able to get onto your next chapter as soon as you’re both ready is to compromise a little bit.

There’s a judge that said if one party is happy with the result that comes from a divorce, it’s probably the wrong outcome because actually neither should feel like they’ve won. Neither should feel like they’ve lost. They should both have had to make some sort of compromises financially. So if you’ve had to do that, but you’re both in a position where you feel that you can move forward and that you’ve got a fair outcome, then that seems like the right result.

That’s a really lovely way to position it because again, emotionally divorce can be amicable, but it can also be not amicable. Again, that’s when the emotions come up and it can cause us to feel ‘I need to be really tenacious and not quick with this.’

There’s lots of and lots of emotions that are going to be flying around with any financial transition work.

Finally Tamsin, if anybody wants to connect with you to have a conversation with you about a challenging situation that they may be going through or to maybe connecting with your podcast, where would be the best place for them to come and find you?

The podcast is The Smart Divorce Podcast and that’s on all normal podcasting places. If you want to connect with us, we’re on Instagram and we’re on Facebook. We’re also on Twitter and you can find us on our website, which is smartdivorce.co.uk.