Cohabiting During Divorce
Continuing to live with your partner after you have decided to end your relationship is not ideal, but more couples are finding themselves in the complicated situation of having to co-habit.
Whilst most people want a clean break and to move on, it may not be as fast or straightforward if you jointly own the property in which you currently live and have an obligation to carry on paying a mortgage. Couples with children can also find that they just can’t maintain the cost of running two homes. So, whilst a relationship may be over, moving out is just not possible, and the only way to move forward is try to live separate lives but under one roof.
If you find yourself if this situation, it is a good idea to seek legal advice about how cohabiting could eﬀect your divorce process. There are also steps that you can take to start to split your financial lives in preparation for independence.
Open Separate Bank Accounts.
This doesn’t mean closing an existing shared account: in fact, continuing to run a shared bank account for mortgage repayments and household bills is a good way of keeping financial transparency.
However, opening a personal bank account if you don’t have one and moving your salary into that account is a good idea. You should also look to pay oﬀ and close any shared credit cards or loans, and take a credit card in your own name if you need one.
The long-term aim is to close any shared accounts and to start to build a credit report in your own name, eventually de-linking your ex-partner or spouse from your individual credit report.
Make Changes to Your Pension Beneficiaries
If you are formally separated, you may want to change the legal beneficiaries of your assets and this is likely to mean writing a new will.
You should also consider making changes with your pension providers in order to change the named beneficiary on your policy documentation. Changing your beneficiaries will not aﬀect any pension splitting which may be agreed upon as part of a legal divorce settlement process.
If you have work based benefits as part of your job, such as death in service cover, you may wish to update the named beneficiaries of these policies too.
Speak to a Mortgage Adviser Independently
A mortgage adviser will be able to give you good counsel and oﬀer solutions you hadn’t considered or you thought were open to you. Mortgage lenders are used to seeing people who are in complicated financial situations, such as those going through a divorce, and there are loans available to help people move forward.
There are also creative solutions which often get overlooked: these can include switching to a Buy to Let mortgage and renting out your property. This can allow both parties to move out, but still jointly own the property and in some cases the rent can more than cover the property costs. This is often considered if both parties can’t aﬀord to buy independently, but want to keep their foot on the housing ladder.
If you are moving out of a property you jointly own, or considering renting out your home to enable you to both move on, then it can be useful to know that you can change the legal status of how you legally own a property together.
If you currently share ownership of your home with your spouse or partner then it is likely that you legally hold the property as ‘joint tenants’. This means you have equal rights to the property, you can claim an equal share of any profit when you sell and you automatically inherit the property if the other person dies.
You can change this arrangement to become ‘tenants in common’, which change these automatic rights. This enables you to formally divide your share of the property and lets you leave your proportion to beneficiaries of your choice, such as your children, if you die.
Arrange New Life Cover
You have to have an ‘insurable interest’ in order to take out a life insurance policy on a named person where you are the beneficiary. Many couples already have life insurance which runs alongside a mortgage and you will still need this insurance protection. However if you are separated and have children, your insurance needs may have changed, even if you are still living together.
You may be reliant on the income from your partner in order to provide for your children and run your home, but you are unlikely to now be the beneficiary of their assets if they die. Whilst it may feel strange, insuring the life of your ex is not uncommon if there are children involved and this protects you all against the financial risk of loss of income on their death. Similarly, if your partner does the majority of the childcare, you would need to be able to aﬀord to replace this help in their absence.
A good financial adviser will help you identify the gaps in your protection needs and help you to set up appropriate cover. They can also explain the reasons for arranging the protection policy with your ex-partner during that process.
If you need mortgage or life insurance advice, or you need help setting up a new pension plan after divorce, then our team of independent financial advisers at Furnley House can help. To find out more call 0116 269 6311 or email firstname.lastname@example.org.
Your home may be repossessed if you do not keep up repayments on your mortgage.