13 crucial financial mistakes to avoid during your divorce

Don’t make these financial mistakes in your divorce!

I spoke with Mark Estcourt of Cavendish Family Office, to discover the top financial mistakes to avoid during your divorce.

Mark is the founder and CEO of Cavendish Family Office, an independent and virtual Multi-Family Office with its “heart” in Mayfair and a team based across the UK and Europe.

Becoming a financial victim

Don’t stay in the dark about finances. If your spouse has always handled all of the financial decisions in your household, seek clarity.  Collect as much information as you can, now. If you believe your spouse might sell or transfer any assets without your consent, seek legal advice as soon as possible.

Not considering mediation

If you and your spouse can work together to reach a fair settlement on most or all the issues in your divorce, mediation offers a flexible alternative to the traditional court route, and could save thousands of pounds in legal fees and emotional aggravation.

Hiring a combative lawyer to punish your spouse

The courts are unlikely to punish your spouse financially for behaving badly except in exceptional circumstances.

Taking this route will also cost you dearly financially – increased legal hours lead to higher divorce costs, which depletes the assets available for distribution.  Don’t be that couple who spend so much on legal fees that there is nothing left to share.

Instead, treat your divorce negotiations as a business transaction. 

Over-using your divorce lawyer

Divorce lawyers generally charge £200- £400 per hour, and partners in well-known London family law firms typically charge £800 per hour.

Lawyers are not therapists, coaches or financial planners.  Make sure you have the right team around you, and don’t use your lawyer as a therapist!

Not considering a divorce coach

Divorce is a legal, financial AND emotional journey.  Often, the emotional journey derails the legal process, making it longer, more traumatic, and way more expensive. 

When you work with a divorce coach to feel calm, confident and in control of your emotions, you will have clarity and be able to make empowered, informed choices.  You will be able to communicate more effectively, and you could save yourself thousands in legal fees.

Failure to evaluate settlement proposals

Take specialist advice to determine how any proposed settlement will impact your finances in the years ahead.  The decisions you make now will still be important in 20 years’ time.

Being emotionally attached to assets in divorce negotiations

The marital residence, the pension you earned, a painting purchased during your marriage, a holiday home - these assets often bring an emotionally charged debate to divorce negotiations, which can impair good decision-making.  Although keeping the family home in exchange for giving up an entitlement to your spouse’s pension may seem like a good decision now, it might be at the expense of your retirement.  Take advice on the long-term implications of these decisions. 

Not producing an acccurate budget

Divorcing spouses sometimes under- or over-estimate their living expenses when they are producing their initial budgets ahead of negotiations.  Consider using a financial professional to produce an accurate and complete budget.

Disregarding the impact of taxes in a divorce settlement

After your divorce is finalised, you may be liable to tax on the marital assets you received.  As part of your negotiations, take specific advice on the impact of this on any proposed property division before you agree to it.

Disregarding the long-term impact of inflation

The effects of inflation on the cost of a child's university education, or on retirement, 15 years in the future can be dramatic.  Take advice, and work inflation into your settlement negotiations so you can cover the true costs of future financial expenses.

Forgetting to update estate documents

After divorce, many people forget to change the beneficiaries on their life insurance policies, pensions, and will(s), so the estates they wanted to leave to their children, new partner, or favorite charity may go instead to their ex-spouse. If you're going through a divorce, talk to a family law lawyer to find out what changes you can make to your estate plan during and/or post-divorce.

Failure to adequately insure the divorce settlement

Your ex-spouse's premature death or disability can be devastating and may result in a loss of maintenance, child support, university tuition, or property settlement payments. Life and disability insurance policies can guarantee that these payments will continue despite an unexpected loss or injury.

Failure to develop a post-divorce financial plan

Your divorce settlement must last a significant amount of time: perhaps even the rest of your life. Financial planning can help people transition from a married to single lifestyle by prioritizing financial goals, developing realistic expectations, and producing sound plans for the assignment and division of financial resources.

Conclusion

Cavendish Family Office pride themselves on providing a bespoke service to all their clients.  That is why they work together with carefully chosen lawyers and divorce coaches to offer a triangular service, connecting you with the right professionals at the right time.


How to contact Cavendish Family Office:

Please contact Mark Estcourt, CEO and founder of Cavendish Family Office: