4 ways financial planners and solicitors can help clients minimise their losses after a divorce

Aside from the obvious emotional challenges, divorce can also cause significant financial strain for your clients.

With shared living expenses suddenly doubling, potential time off work to manage the split, and substantial legal costs, the financial stability of divorcing couples can face considerable risk.

A recent study by Legal & General found that 15% of divorcees go into debt to fund their divorce, while 45% see their income shrink by an average of 30% in the first year. Despite this, only 7% sought financial advice post-divorce, leaving many vulnerable to financial missteps that could have long-term consequences.

Indeed, divorce is one of the life events where financial planning is most valuable. As divorcees face a new financial reality, a financial planner can use cashflow modelling to project the potential outcomes of their current standing and decisions on their future. They can also offer guidance on how to ensure clients remain on track to achieve their long-term goals in the context of their new circumstances.

Moreover, while solicitors always play an important role in mediating and officiating the divorce process, there are several ways you can assist clients to help minimise their losses. This might include helping them draft new wills or ensuring they secure a Clean Break Order to protect against future claims.

By working together, solicitors and financial planners can provide support to clients going through this challenging transition and help them face their future confident that they’re in safe hands.

Read on to discover four ways financial planners and solicitors can help clients minimise their losses after a divorce and look forward with confidence.

1. Value all their significant assets and include them in the settlement

During a divorce, it’s important for clients to review and account for all significant assets in the settlement. Incorrectly valued assets could lead to an unfair division, especially if they are used to offset others in the split.

To help ensure a fair outcome, clients may want to consider obtaining professional valuations for their shared assets. This might include their:

• Main residence
• Vehicles
• Pensions
• Second properties
• Investments

Pensions in particular are often overlooked in divorce settlements, despite the significant role they play in securing long-term financial stability.

The report by Legal & General found that 87% of divorcing couples exclude pensions from asset division, and 23% waive their rights to their partner’s pension entirely.

Failing to account for pensions can leave one partner – often the one with the smaller pension – at a financial disadvantage. This issue disproportionately affects women, who typically have lower pension savings.

So, ensuring pensions and all significant assets are valued and included in the settlement is an important step for clients to take to minimise their losses after a divorce.

Financial planners can help with asset division by exploring various splitting options. Using cashflow modelling, they can project how different settlement choices may affect clients’ long-term financial security. This allows the clients to make informed decisions based on their personal goals rather than settling for whatever is simplest at the present moment.

At the same time, solicitors ensure that the division is legally binding and that both parties agree to a fair and equitable settlement.

Together, financial planners and solicitors can provide comprehensive support during the process of asset division, helping clients reach a balanced split that supports their respective financial stabilities post-divorce.

2. Update their wills, insurance, and other important documents

It’s also a good idea for divorcing clients to update their important documents, such as their will, pension beneficiaries, and life insurance policies, to reflect their new circumstances.

The Legal & General report found that:

• 11% of divorcees have delayed or forgotten to remove their ex-partner from their will
• 11% have not updated the beneficiary on their pension
• 10% still have their former spouse listed on their life insurance policy.

While these oversights may not affect their immediate finances, they can lead to future inheritance disputes and prevent their intended beneficiaries from receiving their rightful share.

Additionally, clients should review and update their Lasting Power of Attorney (LPA). Failing to do so could leave their ex-partner with legal authority over their financial decisions should they become unable to make them independently.

Solicitors are integral in this process, as they can ensure that all documents are legally binding and can help to formalise processes such as LPA registration.

Meanwhile, financial planners can work to ensure that clients’ wills, pension nominations, and insurance policies align with their new financial goals and long-term security.

3. Ensure transparency on fees and shared debts

As you read earlier, 15% of divorcees go into debt to cover the costs of separation. So, to avoid unnecessary financial strain, clients should be fully transparent with one another about all expenses involved, including legal fees, valuation costs, and any additional charges that may arise during the process.

To assist with this, any legal or financial planning fees the couple accrue during their divorce should be made clear at the earliest opportunity, to help avoid any future challenges.

It’s also important for the divorcing couple to clarify how they will handle any shared debts they continue to hold. For example, if both partners are repaying a loan, they must decide who will be responsible for ongoing payments and how they will be divided.

By maintaining transparency about costs and liabilities, both parties can ensure a fair financial settlement, reducing the risk of future disputes.

4. Sign a Clean Break Order

Once clients have finalised their settlement – covering all costs and updating key documents – they may want to consider signing a Clean Break Order.

A Clean Break Order is a legally binding agreement that severs all financial ties between both parties. Without one, an ex-spouse could make future financial claims, even years after the divorce.

By securing this agreement, both individuals gain financial independence, reducing the risk of future disputes over assets, income, or pensions. It can provide clarity and security, ensuring that neither party can seek further financial recourse.

Since a Clean Break Order requires legal assistance, clients will need a solicitor to officiate the process. Meanwhile, financial planners can help clients assess their current and future financial position, ensuring the settlement is fair and sustainable going forward.

Get in touch

To find out more about how your clients could minimise their losses after a divorce and how our sectors can work together for their benefit, please get in touch.

Email info@fbwealth.co.uk or call us on 0333 1122211.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, Lasting Powers of Attorney, or will writing.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.