If the statistics are to be believed married women should financially plan for a day when they are single.
The life expectancy in the UK at birth of men is 79.1 years and women 82.9 years. Furthermore 32% of women are expected to reach 90 as opposed to 21% of men.
According to divorce statistics, 42% of marriages in England and Wales end in divorce.
This means we women owe it to ourselves and our future financial security to get on top of our household finances. Why not make this Valentine’s day the start of a loving relationship between us and our financial wellbeing?
Here are some questions to ask to get the ball rolling.
What assets do each of you own?
It is important to understand what assets are owned by your spouse and by yourself and how these are likely to change ownership on death or divorce.
In the UK in the case of property most married couples will own the property as joint tenants which means that both parties own 100% of the property with neither holding a specific percentage. On death the property will automatically pass to the spouse. The same applies to other assets held jointly such as bank accounts. The bank may ask to see the original death certificate before transferring the asset into the survivor’s sole name.
Where the property is held as tenants in common each party will have a specific share and on death the property will pass in terms of a will.
To identify how a property is held you can obtain the title deed document from the land registry.
Assets owned by the deceased will be subject to the deceased wishes in terms of a will or if no will, the rules of intestate.
On divorce it is irrelevant whose name is on the title deed as each spouse has a legal right to live in the family home unless it is subject to a pre or post nuptial agreement.
The allocation of marital assets will to a large extent be driven by the support of the dependents and the circumstances of each spouse. Although parties can agree this in advance if they are able to, the courts still need to grant a Consent order to make it legally binding.
What debt do each of you have?
When a spouse dies the debts left behind are paid out of the deceased estate, which will include any money or property they left behind. You aren’t automatically responsible for your spouse’s debt unless you had signed a joint loan agreement or provided a guarantee.
If there is not enough money in the estate to pay off debts the estate has to pay off the outstanding debts in a set order before anything can be paid out in terms of the will or under the interstate process.
If you jointly owned your home and there is not enough money in the estate to pay off the debt there is a chance the home may still need to be sold depending on how it is owned. If it is owned as joint tenants, this is where you both own 100% of the property with no specific split between the two of you, the property will automatically pass to you irrespective of the debt. Creditors can however apply for an Insolvency Administration Order within 5 years of death and the courts may agree that the property should be allocated between both of your estates. This may mean you may have to sell the property to settle your spouses debt and avoid the creditors chasing you.
If you are tenants in common you each own a specific share of the property and the property portion belonging to the deceased spouse remains in his estate until the debts are settled once again creating the risk of having to sell it.
Money in joint accounts does not form part of the deceased persons estate and automatically passes to the spouse.
Sorting out debts during the divorce process is critical, being landed with unaffordable debt can negatively impact your credit profile and your ability to start a new life.
Spouses often have no idea of the others credit card usage, personal bank statements and any debt they may have incurred. Courts generally look on debt created during the marriage as being for the union and deduct it from the assets before allocating them out. This is extremely harsh for the partner who didn’t incur or know about the debt. The person whose name is on the debt, however remains responsible for the debt.
Where both spouses are named on the mortgage it is the responsibility of both even if one spouse no longer lives in the property. If the remaining spouse is unable to remortgage either due to a poor credit profile or insufficient funds but can afford the mortgage without the other spouse they can enter into a Declaration of Trust with their spouse who remains on the mortgage ,no longer makes payments on the mortgage and is indemnified should the remaining spouse default. The vacating spouse is still entitled to their share of the house when it is remortgaged or sold.
The risk for the spouse remaining in the house is that the other spouse racks up debts and the creditors come after his share of the house as payment. The remaining spouse could be forced to sell the house to settle the debt if they do not otherwise have cash availability to do so. It is very important to obtain legal advice before entering into any agreements with the ex spouse.
Is there Insurance Cover?
An important question to answer is whether any insurance policies have been taken out to settle the mortgage on death, for payment protection cover on loans and credit cards and for any type of death in service benefit. It is important to know the coverage these policies offer.
It is worthwhile to create a file listing what the policies are, where they are held, what they cover and who the relevant contact person is. While life is good this may seem a total waste of time, but that is the best time to tackle these things.
Do you have a will and what is in it?
As a starting point it is critical that both you and your spouse prepare a will. Ensure that you share the will with each other. Keep copies in the file mentioned above. Notify family members of where it is and who the executors are.
Be clear who is listed as beneficiaries of your spouse’s retirement accounts and any life policies as these may not have been specifically addressed in the will.
Have you checked your credit score?
It is important to keep track of your credit score and credit report at all times as it is a good source of identifying fraud and such on your accounts.
While divorce won’t in itself negatively impact your score, there are negative implications from your spouse not meeting their obligations on debt you are jointly responsible for.
If you are recently divorced remove your spouse as joint signatory on any bank accounts and such as well as an authorised user on your credit card and look to sever all financial ties, especially those debt related, as soon as possible.
Stay on top of all payments on accounts that you are jointly responsible for and don’t rely on your spouse to meet joint obligations.
Keep a regular eye on your credit score.
Do you have a separate bank account?
The best gift you can give yourself and your spouse is financial independence. Having a separate bank account in addition to a joint one is a big step to achieving this.
Some might argue that this is marital sabotage as you are setting yourself up for marital failure with this lack of trust. I would argue to the contrary as it in fact proves you do trust your spouse to manage their share of the pot in a mindful manner.
Separate bank accounts give each spouse financial and personal autonomy and surely that strengthens the relationship from the perspective that both spouses are in it because they want to be not out of the necessity of being financially dependent.
It all sounds very pessimistic setting yourself up to be a single women, and note out to the universe hopefully you never have to face this, but taking the simple action of understanding and being responsible for your own finances during the marriage means that if something negative does happen you are not having to face this financial challenge at the same time as you have to face the personal challenges of a life change.