The financial impacts of divorce or separation

“Of course, happy couples don’t like thinking about divorce or separation, but it’s good to know your priorities and red lines if ever you decide to part ways. Many couples aim to have a happy and strong relationship. But if things go wrong, it’s reassuring to know you’re protected from the fallout. Who gets what? And what does each partner’s financial situation look like? As advisers, we’re here for you every step of the way, including when you make these crucial arrangements. We can run through various scenarios and help you to understand what you really want,” says Yvonne.

“Divorce and separation can be tough on both partners. You’ll be full of doubts and questions. This is the time to seek out the right support and help. An impartial mediator can help you to reach agreements, making sure your separation is as smooth as possible. This option could work for you if you’re on good terms, as it can often reduce the costs of divorce or separating. If you’re not on speaking terms, you might consider hiring a solicitor. In most cases, each partner will hire their own solicitor.

It’s worth nothing that a ‘mediator’ (sometimes known as a ‘divorce counsellor’) isn’t a protected title. That’s why it’s important to choose an accredited adviser from the official register (‘Register Erkend Scheidingsadviseur’, website in Dutch), so you can be sure you’re accessing proper support from an expert.”

“Divorce involves agreements and arrangements – lots of them. How will you split your possessions, assets and home? See what you can agree between yourselves, and record those agreements in a financial plan. The more prior agreements you can reach together, the less stressful your divorce or separation. A mediator or solicitor will record these agreements in a written separation agreement, which will need to be validated in court.”

“If you have children, you’ll need to draft a parenting plan that sets out care arrangements, child maintenance and child arrangements – where the children live and how much time they spend with each of you. Drafting a parenting plan is compulsory. A mediator or solicitor can often help you to record your agreements.”

“When clients come to me having decided to divorce or split up, they bring a whole lot of emotional baggage. I try to reassure them and give them perspective on their financial future. Many couples want to know more about dividing up assets and their home. If one person wants to stay in the house and the other wants to buy them out, each person’s finances often play a crucial role in that decision. A mortgage adviser can help you to explore your options.”

“If you’re registered partners and have children aged under 18, the separation process is more or less the same as a divorce. If you have no children, a notary or solicitor may dissolve your partnership out of court. In that case, the notary or solicitor will record the agreements in a document that you both sign.”

“Besides your current assets, property and wealth, separating can also affect sources of income like benefits and pension. If your former partner has debts, you’ll absolutely need to discuss them, possibly with the support of a financial adviser. Your tax returns will be another thing to look at, and it’s wise to seek advice from the Dutch Tax and Customs Administration (Belastingdienst). Any joint accounts, insurance policies and so on also need to be factored in. The Dutch government’s website has a useful checklist of all the things you need to consider in each specific situation.”

“People regularly forget to report changes to agencies like their pension fund (which needs to be notified within two years of your separation). You may also need to change your will or the names of beneficiaries on insurance policies.”

“Make sure you’re informed. People usually know about the risks of a partner passing away or becoming unfit for work. In fact, clients often bring up those topics during consultations. Separation and divorce, in contrast, don’t get as much attention, which is why ABN AMRO is committed to raising awareness. While we don’t offer settlement mediation as a bank, we can help you to understand the financial aspects, risks and your options. That’s why we’ve developed a planning tool specially for Preferred Banking clients called Financial Outlook. This interactive support helps you to gain a better perspective on your current and future financial situation, factoring in risks such as divorce.”

It goes without saying that financial independence is a big part of that. “Ideally, each partner should understand what would happen to them if they divorced or separated. Couples find that having an open conversation during my consultations really helps them. What they end up agreeing on, however, is completely up to them. Some may knowingly take a risk, but at least they’re informed.

One major point that comes up a lot is differences in partners’ incomes. My advice for partners who are going to marry or sign a cohabitation agreement is this: if you know one earns more than the other, set out financial agreements in your cohabitation, prenuptial or civil partnership agreement. This makes sure financial assets and obligations will be split in a way that feels fair for you both, should you ever part ways. I recently had a consultation with a couple on very different incomes who set out an alternative way to split their joint wealth in their cohabitation agreement. They thought it would be fairer on both of them if ever they split up.”