How to separate your finances from your ex-partner
Breaking up is hard to do; but it can be made even harder when you have a mortgage, debts, or joint accounts with your partner. We take you through what you will need to consider to make the split as smooth as possible.
If you and your partner have decided to separate, financial concerns are likely to be the last thing on your mind. However, if you have a home together, kids, are married, or have joint accounts, there are issues to sift through.
Arming yourself with the right information will make you feel more prepared for separating your finances from your partner's, and will ease the process. We take a look at what you need to do.
What if I have joint credit with my ex?
A joint credit agreement with your partner could be a loan or credit card you took out together, or an overdraft on your joint current account; essentially any credit facility you use together that is held in both your names.
If you have any joint accounts it is vital you get these frozen as soon as possible, then sit down with your partner and discuss equal arrangements for paying back any outstanding money.
With any joint credit agreement you will both be jointly and severally liable for repaying the debt. This means that if your partner does not want to pay up you will be chased for outstanding payments.
It also means that if you have a credit card with an outstanding balance of £3,000, for example, you do not owe £1,500 each - you are both equally responsible for the full £3,000.
After you pay back any money owed to lenders, you will be able to close down the joint accounts. However, it does not stop there; any joint credit agreement you make with anybody will result in your credit ratings becoming linked, by creating a financial association.
You must no longer live at the same address, and all joint accounts, loans and credit cards must be settled and cancelled before you can apply.
As such you may want to apply for financial disassociation to ensure your credit reports are completely disentangled - you can do this by contacting one of the following credit reference agencies:
Did you know
After you have contacted one credit reference agency, your new circumstances should be automatically shared with the others.
What if I have savings with my ex?
If you have savings or a joint current account with your partner, any funds you have will have to be divided fairly between the two of you, and the accounts closed.
It is likely that sitting down with your partner and calmly discussing who gets what is the last thing you want to do, but it is really important to get this sorted out as soon as possible.
If you cannot agree on how the funds should be divided (for example, your partner might argue that he or she contributed more to the account than you), then it may be necessary to bring in a mediator who can help you work things out.
However doing this can come to thousands of pounds, so it is best to try to come to a solution amicably with your partner first.
Last resort
If you and your partner are having real disagreements you can request that your bank freeze any funds in a joint account until you both give permission for it to be released as you wish.
What if we have a home together?
Mortgage (Co-habiting)
If you are co-habiting with your partner, and especially if you have a mortgage together, there are several things to consider.
If you are married, both of you have equal right to the marital home regardless of whose name is on the mortgage.
However, if you are renting and are not married, you have no right to stay in the property if the tenancy is not in your name.
Tenancy rights
You may be asked to leave, or you may ask your partner to leave if it is your name on the rental tenancy.
Mortgage (Common-law-partners)
If you have a mortgage but are 'common-law partners' rather than married, you have no inherent right to the home unless you are named on the mortgage.
If your partner is the only person named on the mortgage you have no right to stay living at the house unless you can prove you have made significant contributions either to the mortgage or to other household bills such as council tax.
However, if your name is on the mortgage documents then you are both still responsible for paying the mortgage even if you move out. You will need to work out how you are going to cover your mortgage payments from now on, whether you want to sell the property, or perhaps rent it.
Did you know
There are different rules that apply depending on whether you took out the mortgage together in both your names, or if you are separately named individuals on your mortgage documents.
Renting (Joint tenancy)
If you have a joint tenancy, it is important to get your name removed if you are planning on moving out (or vice versa if your partner is moving).
If both your names are on the tenancy you both will be responsible for keeping up the rent until the end of the tenancy, or until one of you moves out and removes your name from the tenancy.
You should also ensure your name is removed from any council tax or other household bills before moving out.
Only paying for bills?
If you are in a situation where your partner pays the mortgage but you pay for bills or groceries for example, but the house is solely in your partner's name, you can apply to the courts for recognition of your contribution to the household. This is known as 'beneficial interest'.
If granted, you may then be able to stay in the property or receive a payout if the house is being sold.
If you are considering doing this, visit the Citizens Advice website for further support:
What if we have children?
Bringing children into the equation naturally makes splitting up a lot more complex, and you are likely to need help from the Child Support Agency when it comes to agreeing on maintenance payments and so on.
You will now need to budget for two households rather than one, and will have to work out exactly how much you will need to cover living costs, rent, and household bills.
What about my pension?
If you have already arranged your pension then you may have named your partner as a beneficiary, with a payout set to go to them on your death.
Assuming you no longer want this to be the case after you split, it is important to re-name your beneficiary or simply name your estate.
Likewise, if you have a life insurance policy or have written your will, contact your provider to have the beneficiary changed; or alternatively you may be able to change your joint life policy to single life.
Important
If you are married and getting divorced, and have not nominated anyone as a beneficiary, a payout will still automatically go to your ex-spouse upon your death.
Joint annuities
Joint annuities make things a little more complex. If you have a joint annuity with your partner, this means payouts will go out annually to them upon your death.
Unfortunately these are difficult to change as the original annuity will have been decided by taking into account the specific circumstances of you and your partner. Contact your pension provider in the first instance.
What about our things?
More and more married couples safe-guard themselves against the possibility of divorce these days by signing a pre-nuptial agreement before entering into matrimony.
If you are one of these couples, separating your assets will be a much simpler task; otherwise you will have to come to an agreement on your own.
You might decide to keep the things you owned before the relationship, and split everything else down the middle. Or, you could just split everything equally.
Whichever agreement you come to, you will have to consider the needs you will both have in the future, as well as what you need now - your respective careers and projected working lives should be taken into account, for example.
Some of your possessions may need to be valued, so that you can work out how best to split things; for example if you have a car, antiques, or investments. Bringing in a third party to provide a valuation can be an extra expense.
If your affairs are particularly complex you may need to bring in solicitors, but it will be cheaper (and hopefully less stressful) if you can work things out among yourselves.
If you open a joint account, do not just open one with your current provider – find the best one by comparing all of your options.