01 Mar 2024

Divorced and living together

Making it work for you and your finances

Could you imagine having to live under the same roof as your ex? What if finances meant you had no choice? It’s a common, but difficult position divorcing couples find themselves in today.

The introduction of a ‘No Fault Divorce’ in 2022 has made separation easier for many couples. But it hasn’t solved the difficult situation of – where to live if you can’t afford to part ways?

Deciding who keeps what in a divorce or separation is a sensitive and difficult topic. A lifetime's worth of memories and belongings can’t simply be divided up, making the process even tougher. And choosing who stays in the home that you may have lived in for decades can be even more painful.

In a world of rising costs, more couples are trying to make things work while living together, apart.

In this article, we’ll talk you through your options, and meet a couple who took matters into their own hands.

Couple lying on separate sofas

Pensions and divorce

If you’re going through a separation, it’s important not to overlook your pension. Learn more about the importance of pensions in divorce.

Divorce in retirement

Divorce is common in retirement and later life, with one in three taking place over the age of 50. While every relationship is unique, there are common reasons why couples go their separate ways in later life. With the time to pick up new hobbies and meet new people, couples often drift apart because of their newfound freedom.

But, whatever the reason for a divorce, it’s important to think about your financial situation now, and in later life, too.

The impact of a divorce on your finances can be a big worry, too. Our research shows that women’s household income falls by as much as twice as men after divorce. So, separating and running a home on a single income, might not be an option. Other aspects such as location, schools, the support network of friends and family are common reasons to stay under one roof. And, with divorce-related costs reaching an average of £14,561 (and far higher if a property is involved), some couples choose to continue living together.

Pensions are often overlooked when going through a divorce. Even though they could be one of the largest assets after the family home, just 20% of 50-plus couples take them into account when dividing assets. 30% of women turned down a share of their partners pension altogether.

But taking what you’re legally entitled to can really help your finances in later life. If you get divorced you’re legally entitled to some, or even all your partner’s pension. This will be agreed during the divorce proceedings and the court should consider any pension rights.

Ashe and Rob’s story

Ashe and Rob faced exactly that – the prospect of divorce in later life.

The Dublin-based couple, who still run their own design production company, realised that after many years their intimate relationship was over. But they decided against getting divorced.

Ashe says: “Our marriage was finished, but with a mortgage and our own business to support, we couldn’t afford to split up. So, I moved into the spare room as we both tried desperately to keep ourselves sane and functioning.”  

 

The first two years were the hardest as they both adapted. Separate bedrooms, allocating household tasks and being honest with their family about it was key. Ashe says: “We are both totally upfront. We operate on the philosophy that it is better for everything to be out in the open because then the family don’t have to guess or think that they are to blame for anything.”

The couple each have their own bank accounts and say they never argue about money. They haven’t signed any legal agreements or applied for a legal separation as it would be costly. Both feel things are working well currently.

Ashe and Rob have been lucky enough to work this out without intervention. But, in the vast majority of cases, couples aren’t able to work through the process amicably. Making sure there’s some kind of legal agreement might be advisable in situations like this.

Divorce is costly and can be traumatic, so this arrangement could work for some. Particularly where there is little acrimony, and a new relationship structure can be agreed. 

Using equity release to stay in your own home

The upheaval of a divorce in later life can be enough to worry about, before having to think about the financial implications. When approaching retirement, it’s common to have money worries. You may have been working for decades, and will no longer have the regular stream of income you did when you were employed.

That’s why many of those in later life take out a Lifetime Mortgage. It’s a type of equity release available to those aged 55 and over (or 50+ for our Payment Term Lifetime Mortgage). It’s a loan secured against your home. The money can then be used to boost retirement income or to make home improvements. But it’s also possible to use equity release in a way that allows one partner to stay in the home and the other to access their part of the funds to move out. In our recent research we found that nearly 1 in 10 people used the money to help them stay in their own home following a divorce. 

As Craig Brown, CEO of Legal & General Home Finance, says:

 “Most couples aged over 50 will view their home as their most valuable joint asset. So when they begin the process of separating their finances, at the point of divorce, it's naturally at the top of the agenda. There are also practical and emotional elements attached to where the couple have been living, which often means one party wants to remain in the family home. In such cases, using a lifetime mortgage to access the equity that's built up can provide a solution that works for everyone involved."

Lifetime mortgage calculator

If equity release sounds like it could be an option for you, use our lifetime mortgage calculator to see how much money you could release from your home.

It’s not right for everyone, though. That’s why you can only take out an equity release product through a qualified financial adviser. They’ll make sure you understand the product and that it’s right for you.

While using equity release for a divorce or separation might be right for you, you should explore other avenues, as there may be cheaper ways to borrow money. It can also affect any means-tested benefits you receive.

Further support

If you’re looking for further support and feel as though you’re unable to leave your family home, it’s a good idea to speak to a financial adviser, who may be able to help. If you don’t have one, you can find one at Unbiased. You’ll likely have to pay for their advice though. You can also visit MoneyHelper. Set up by the government, it provides free and impartial guidance on lots of different topics, including divorce.

 

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