Financial Planning for Divorce in Ireland

Today marks the 20^th anniversary of the granting of the first divorce in Ireland. There have been another 50,000 since.

Financial planning for an individual who is divorced can be complex where there are significant assets or a first and second family to consider. By identifying and managing the issues early in the process, the outcome for those involved may be significantly improved.

Financial Planning for Divorce five areas to consider :

1. Capital Acquisitions Tax in Divorce –

   Transfer of assets between spouses whether by way of gift of inheritance are exempt from Capital Acquisitions Tax (CAT). Separation does not affect this exemption but divorce does. Ensure assets are transferred before the decree of divorce.

2. Maintenance payments

   – where divorce requires that one party put life cover in place to provide maintenance payments for children in the event of death while the children are still dependant, there are two options available and one may result in a significant CAT liability. Ensure the life policy is structured to avoid a CAT liability on any payout.

3. Pension Adjustment Orders (PAO)

   – the pension benefits for many are often the most valuable asset after the family home. A PAO allows a legal way of splitting up pension benefits in the event of the breakdown of a relationship recognised by law. Pension benefits cannot be shared out without a Court Order. Proper financial advice will help you to understand the value of the pension benefits, both before and after any settlement is made.

4. Succession Rights in Divorce

   – Succession relates to the inheritance of a person’s property on their death and is governed by the Succession Act 1965. The Act gives the surviving spouse/civil partner an automatic right to a share in the estate of their deceased spouse/civil partner. Once a decree of divorce/dissolution is granted, the parties are no longer married or in a civil partnership, and succession rights are automatically extinguished.

5. Widow’s, Widower’s or Surviving Civil Partner’s (Contributory) Pension in Divorce

   – If you are divorced (or your civil partnership has been dissolved) and you would have been entitled to a Widow’s, Widower’s or Surviving Civil Partner’s (Contributory) Pension had you remained married, you keep your entitlement to the Widow’s, Widower’s or Surviving Civil Partner’s (Contributory) Pension. The pension is payable regardless of other income.

 Financial planning for clients who have experienced a relationship breakdown can be complex but the right advice will ensure that both parties continue to plan for a secure and comfortable life. Getting good financial advice early in the process is key to this!