Knowledge is power. Seldom is that phrase as true as when a marriage falters. Sadly, even in the 21st century, it is so often the husband that remains in the position of power when things go wrong.
For more mature couples, this issue is of real relevance, particularly following the ONS’ recently reported rise in divorces amongst older couples. Many such couples still organise their domestic affairs as their parents once did. This conventional division of labour usually means that wives will have left the financial side of their marriage to the organisation and discretion of their husband. Some wives have no knowledge of their family’s financial position at all.
It might be easier to understand why a wife who has not worked outside the home would fall into this situation. At some point, most family practitioners will have encountered a wife whose only engagement with the family finances is her use of her husband’s credit card. Whilst it lasts, this probably feels like an ideal arrangement but having no knowledge of what you are spending or how things are paid for is a distinct disadvantage when a marriage hits the buffers.
What is surprising is the number of wives who fall into this uninformed category, even though they have careers and incomes of their own. Short of their own income, they may still have no knowledge of how the finances are arranged, or in whose name assets are held. When a marriage ends, a lack of knowledge about these things can add to the distress. Learning to manage your own finances for the first time, whilst coping with the emotional upheaval of separation and divorce is a huge task.
When a marriage unravels, the financial division of the assets must obviously be dealt with. Having a basic idea of the value of the assets, and the form they take, is a significant advantage. One of the first pieces of advice that a divorcing spouse receives is that they will need to give full and frank disclosure of their financial position. It is advice that those holding the financial reins do not always want to heed. There have been several recent well-publicised cases of husbands being dishonest about their wealth. In the cases of Sharland and Gohil, the Supreme Court heard that there had been deliberate deceptions practised by the husbands on their wives: the “laying [of] a false trail” as one judge put it. In December 2015, the former ‘Dragon’ Duncan Bannatyne’s dishonesty was reported. He apologised for providing incorrect evidence to the court about the value of his business during his divorce. If you are unlucky enough to be divorcing someone who is prepared to blatantly lie about their finances, you have a much harder battle to fight if you have not asked questions or taken notice of the family’s financial transactions over the course of the marriage.
In some divorces, particularly after long marriages, it is customary to look at sharing assets equally. There are sometimes reasons why that might not be appropriate, for example significant inherited wealth or a pre-nuptial agreement. However, where the ‘yardstick of equality’ should be applied, knowing that the assets should be shared equally is of little help if you do not know the extent and whereabouts of those assets. Having half is fine, but half of what?
A little bit of background knowledge is very helpful here as a starting point. As assets become more complicated and easy to hide, this knowledge becomes increasingly important. Disclosure is normally shared by the completion and exchange of a standard court form. That form deals with standard assets – property, bank accounts, business assets etc. It is easy to overlook less conventional assets such as PayPal accounts, airmiles, online gambling accounts, pre-paid credit or foreign exchange cards, bitcoins and other cryptocurrencies. These may have a reasonable value, and certainly a value that one spouse would want taken into account on a divorce. However, the asset that is commonly overlooked by wives is still their husband’s pension. Research from Scottish Widows recently showed that 84% of wives still routinely forget to take into account their spouse’s pension on divorce. Such oversight could be very much to their detriment.
Taking an interest in the finances during the marriage gives an enormous advantage when things go wrong for a number of reasons. If your marriage fails you will regret not asking questions sooner so consider the following:-
- Take action during your marriage, even if there is no suggestion of a divorce. Even if you have no genuine interest, ask your spouse to tell you broadly what the assets are and where. Ideally write this information down – you never know when you might need it. You shouldn’t have to justify the question but if you do, explain how much easier it would make things for you to have that knowledge in the event of their unexpected death.
- Do not be told that assets are your spouse’s just because they are not in your name, or just because you are not working outside the home and earning an income. In a divorce, all assets need to be disclosed and taken into account regardless of whose name they are in, and regardless of who the ‘breadwinner’ is.
- Find out what assets (if any) have been put in your name. There may be tax consequences to deal with and these will be your responsibility regardless of your knowledge of the assets.
- Are your tax affairs being dealt with, and if so, by whom? If they aren’t and you receive a large bill from HMRC when a divorce brings the problem to light, it is only going to increase stress levels at an already difficult time.
- Don’t sign anything without knowing what it is and what it is going to do. Imagine a scenario where you sign a document allowing your home to be re-mortgaged without realising it. If you have no visibility on where the equity in your house is being transferred to, you could be left in a very vulnerable position.
- In a divorce, spouses are required to set out their income needs for the future, both in terms of income needs and capital needs to buy, for example, a house. It can be immensely difficult to do this accurately when you have little or no idea of what you have spent routinely spent during the marriage. If you under-budget, it will be hard to argue to increase what you need once you realise your mistake. Equally, if you significantly over-budget, your case may be taken less seriously if your figures are not based in reality. I can recall one wife who was so unaware of the relative cost of things that she misjudged the value of one of her designer gowns by a factor of 10. She believed it had cost £32,000, when in fact it cost (just) £3,200!
- Keep your eyes open. You don’t need to know every last detail but having a little knowledge can help identify hidden assets. If you have seen envelopes arriving from a particular bank, and no corresponding account is disclosed, you know to ask a question about accounts with that bank. Targeted questions are usually much more effective.
- Knowing who your spouse works for (and who they have previously worked for) will allow you to check whether they have disclosed pensions from their previous roles.
- If you do online banking, make sure that you know the security codes and passwords for your own accounts and for joint accounts. It isn’t unusual to find an account in a wife’s name which has been entirely operated by her husband online, and to which she cannot gain easy access because he has the details necessary to access it.
- Empower yourself. Making financial decisions jointly during a marriage will better equip you for making similar decisions on your own after a divorce – things will not feel as alien and frightening to deal with.
- Participating in financial decisions may allow you to put the brake on riskier financial schemes. Couples often have very different tolerances for risk. A more conservative spouse may block schemes that are high risk, potentially preserving assets that might otherwise be lost if the risk does not pay off. Your views are relevant – let them be known.
Article by Nicola Harries, Partner
First published in The Mutton Club, January 2016
Nicola Harries