Financial Planning Checklist for Divorce

Divorce is one of the most financially complex life events most people will face, and the financial consequences — if not properly managed — can persist for decades. The emotional difficulty of the process creates a temptation to accept unfavourable financial terms in order to resolve things quickly, or to overlook assets and obligations that will become significant issues later. This checklist is designed to help HNW individuals and their advisers approach the financial aspects of divorce systematically and without omissions.

Step 1: Full Asset Disclosure — Form E

In England and Wales, both parties to a divorce are legally required to provide full and frank financial disclosure via Form E. This is a comprehensive document covering:

• All bank, building society, and investment accounts
• Property (UK and overseas), mortgages, and equity
• Business interests and shareholdings
• Pension valuations (see below)
• Debts and liabilities
• Income and expenditure
• Interests under trusts

For HNW individuals, Form E raises particular complexities: valuing private company shares, LLPs, and business partnerships; identifying beneficial interests in trusts (which are disclosable even if you are not the settlor); overseas property and accounts; and pension rights in defined benefit schemes, which require a CETV (Cash Equivalent Transfer Value) from the scheme actuary.

Non-disclosure or misleading disclosure is a serious matter — courts can set aside financial orders made on the basis of non-disclosure, and fraudulent non-disclosure can result in contempt of court proceedings. Ensure your financial adviser and solicitor work together to identify every disclosable asset.

Step 2: Pension Sharing Orders — Do Not Neglect the Pension

Pensions are frequently the largest single asset in an HNW individual's estate, yet they are often overlooked or inadequately valued in divorce proceedings. A pension is not a liquid asset that can simply be divided; it requires a Pension Sharing Order (PSO), which is a court order directing the pension trustees to transfer a specified percentage of the pension credit to the other spouse.

Key considerations:

• CETV timing: Defined benefit CETV values can fluctuate significantly with interest rate assumptions. Obtaining a CETV at the right time in the process (typically at the point of valuation for proceedings) and understanding what it represents is essential. An independent actuary or pensions on divorce expert (PODE) can provide a second opinion on complex DB schemes.
• SIPPs and DC pensions: Defined contribution pensions (SIPPs, personal pensions, workplace DC) are valued on the fund value at the relevant date. Multiple pension pots need to be aggregated.
• Deferred annuities and final salary schemes: These require professional valuation and pension-on-divorce specialist input.
• International pensions: A QROPS, QNUPS, or overseas pension scheme will require specialist assessment of whether a UK PSO can be applied and how the overseas trustees will respond.
• The 2027 pension reform: From April 2027, unused pension funds will be included in the estate for IHT purposes. This changes the relative tax efficiency of holding wealth in a pension versus investing outside, which is relevant to how you structure a settlement if pension values are being shared.

Never agree a financial settlement that ignores or undervalues the pension position. Get a PODE report for any significant DB pension scheme.

Step 3: Matrimonial Home — CGT Exemption Rules

The principal private residence (PPR) relief on the matrimonial home is more generous in the context of divorce than most people realise, but it requires careful management:

• PPR relief on sale: If both parties lived in the home as their main residence throughout ownership, the full gain is exempt from CGT regardless of when the sale occurs — provided the sale takes place before completion of the divorce or as part of the financial settlement.
• Transfer to a spouse: A transfer of the matrimonial home (or other assets) between separating spouses can benefit from CGT no-gain no-loss treatment. From April 2023, this window extends to up to three years after the end of the tax year of separation, and indefinitely where the transfer is made under a formal divorce agreement — a significant improvement on the old same-tax-year rule.
• HMRC's revised rules (from April 2023): Previously, a spouse who moved out of the family home lost PPR relief on their share after they ceased living there (typically after just 9 months under old rules). From April 2023, the rules were significantly improved: a spouse or civil partner who has vacated the property retains PPR relief on any deferred sale for up to 3 years after departure, and the timing of PPR relief on the retained share during continuing occupation is also more generous. This reduces the urgency to rush a property sale purely for CGT reasons.

Always check the current position with your tax adviser, as rules do change.

Step 4: Joint Mortgage Release

A joint mortgage cannot simply be removed by agreement between the parties — the lender must approve any release of one party from the liability. The remaining party must demonstrate to the lender that they can service the mortgage on their individual income. In a rising rate environment, this affordability assessment can fail even where the couple previously managed the payments jointly.

If a transfer of ownership is contemplated as part of the settlement, the financial order should address what happens if the mortgage cannot be ported or the lender refuses to release the departing party. Solicitors should draft a default mechanism (for example, a sale requirement if release is refused within a specified period).

Maintain independent credit records throughout the divorce process. Joint accounts and overdrafts should be separated or frozen to prevent one party incurring liabilities that affect the other.

Step 5: Re-Insurance Needs Post-Divorce

Divorce changes the insurance landscape significantly:

• Life insurance: If life insurance was arranged to protect joint mortgage liability or provide for a spouse, the policy expression of wishes and beneficiary nomination will need updating. Some policies allow change of life insured; others will need new policies arranged.
• Income protection: If maintenance obligations were assumed (spousal or child maintenance), confirming that income protection continues to cover these obligations is important.
• Health insurance: Joint health insurance policies need to be separated. Ensure continuous coverage is in place; any gap in coverage for conditions arising during the gap period may be excluded as pre-existing under a new policy.
• Critical illness cover: Review and update beneficiary nominations.

Step 6: Update Pension Nominations and Will — Immediately

This is arguably the most urgent action on this list and one of the most commonly overlooked:

Pension nominations: Pension death benefits (including defined contribution lump sums) are typically paid at the discretion of the pension trustees, guided by expression of wishes nominations. If a nomination names your former spouse, the trustees will consider it, and in some cases may pay death benefits to the ex-spouse, particularly if the pension is the fund to which a PSO has not yet been applied. Update all pension nominations immediately on separation — do not wait for the financial settlement to conclude.

Will: Under the Wills Act 1837, a divorce automatically revokes gifts to the former spouse in a will made during the marriage, as of the date the decree absolute / final order is pronounced. However, the executorship appointment of the former spouse is also revoked, which can leave the will partially effective but potentially without an executor. More importantly, the period between separation and the final order can be lengthy — months or even years — during which the existing will remains fully operative. A new will should be executed immediately on separation to reflect current intentions. If you die intestate after divorce, the rules of intestacy apply, which may not reflect your wishes for non-marital family members or dependent children.

Step 7: Review and Separate All Financial Products and Accounts

• Close or convert joint ISAs (ISAs cannot be held jointly; any joint account contributions need to be split)
• Separate joint bank accounts and establish sole accounts
• Notify investment platforms, financial advisers, and brokers of the change in circumstances
• Review joint power of attorney arrangements — if your former spouse is your attorney under a Lasting Power of Attorney, this should be reviewed

A Note on International Complications

For internationally mobile HNW individuals, divorce becomes significantly more complex if:

• Assets are held in multiple jurisdictions
• A foreign marriage, foreign domicile, or pre-nuptial agreement governed by foreign law is involved
• Overseas trusts or companies hold significant assets
• One or both parties have recently changed tax residency

International family law is a specialist field; engage a specialist in cross-border matrimonial finance alongside your domestic family law solicitor.

How Global Investments Can Help

We work with clients navigating the financial complexities of divorce, coordinating with solicitors, pension specialists, and tax advisers. Whether you need independent valuations of business interests, pension assessments, re-insurance planning, or a comprehensive post-settlement financial plan, our team provides objective guidance that puts your long-term interests at the centre. Contact us in confidence.