Happily wed? Get ready for divorce

In a second article on women and finances, Jean Eaglesham looks at planning for the big split

IT MAY be the season to be merry, but Christmas could strain many couples' relationships to breaking-point. Matrimonial lawyers often experience an upsurge in business as a result. "I think there are more problems after Christmas - it's a stressful period," says Richard Sax, a partner at Manches & Co, who is a past chairman of the Solicitors Family Law Association.

The subsequent new year divorces will not find everyone completely unprepared. A surprising number of women keep a contingency divorce fund, according to a survey earlier this year by insurer Eagle Star. This found that one in seven married and co-habiting women - compared with fewer than one in ten men - has a pot of "running- away" money kept secret from her partner.

The fact that more women than men admit to this may simply reflect the relative financial strengths of the two genders. True, the trend is towards a "narrowing of the financial gap between men and women who are getting divorced, particularly in the South-east where a lot of men have been made redundant in the last two to three years," according to Mr Sax. But the vast majority of divorces still involve a wife who is financially dependent on her husband, usually because she is caring for the children. Although divorce almost invariably leaves both parties worse off financially, women who are not working are particularly vulnerable to potential hardship.

"The typical age for divorce is mid-to-late thirties, and most men have not yet built up substantial pension or other financial assets by then. Women get relatively little back for the time and effort they've invested," warns Mark Morpurgo, an advis- er with the Glasgow-based Personal and Corporate Solutions.

Because of this risk of being left with relatively little on divorce, financial experts advise married women - particularly with children - to plan seriously for this worst-case scenario. "The best time to get independent advice on divorce is while you're still happily married - and hopefully will continue to be so," says Mr Morpurgo. There may seem little point in planning for divorce (other than when marrying someone much wealthier than yourself), given that the law looks at joint assets and liabilities when deciding who gets what, irrespective of whether the assets are in single or joint ownership. A wife may thus have a claim to half the value of a house in her husband's sole name, and vice-versa.

But things do not always work out like this in practice. Fiona Price, founder of independent adviser Fiona Price & Partners, says: "It can be hard to find out what the husband's assets are when you're negotiating a divorce. People can and do try to conceal assets. The best bet is to have a joint financial review and find out what the situation is while the going's still good."

As well as checking up on offshore accounts, villas in Spain, and other potential lucrative hidden assets, the main areas it's worth reviewing as part of your financial planning for a potential divorce are:

q The pension entitlements both of you have built up so far. As of next April, a divorced wife will be entitled to a share of her ex-husband's company pension scheme, and vice-versa, but only when the ex-spouse actually retires and starts drawing the pension. If he dies before then, or cannot be traced, too bad. Even if part of the pension is paid over in retirement, as soon as the ex-spouse dies, the share of the pension dies with him (in contrast to widow's rights under occupational schemes, where the pension is paid after the spouse dies.)

A recent survey by the insurer Legal & General found that the women who would prefer to get a share of the pension fund on divorce outnumbered by two to one those opting to wait until their ex-husbands retired . Sally Quinn, a leading campaigner at FairShares, which is lobbying for such a split, says: "The bottom line is that women earn less than men, have less pension provision than men and need certain access to their husband's pension on divorce - not possible access years later." However, the campaign has so far fallen on deaf ears in government - possibly because of the estimated cost to public-sector schemes of up to pounds 500m for such a change.

Even if the campaign eventually succeeds, women should, if possible, build up their own independent pension provision. The younger you start doing this the better, as the investment has longer to grow and to compensate for possible gaps in contributions such as career breaks.

q Your life insurance cover. This is obviously important while you are married - if a spouse dies, it should help the survivor and children cope without that person's income. But it is also important after a divorce. If you negotiate regular maintenance payments, rather than a lump sum, the payments die with the person making them - as does any payment from his or her pension - so it is important to have some payout after the person's death to cover this potential loss of income.

You can take out a life insurance policy on an ex-spouse paying you maintenance or some other ongoing settlement, but only up to the amount of money you stand to lose. The limit is to deprive you of an incentive to hasten the demise of your ex-spouse. However, not only will it be cheaper to sort out a policy while you are still married - the younger the life insured the cheaper the policy - there are also no limits on the amount of life insurance you may take out on a spouse, even one you are separated from. Also remember that when you break up, your spouse may well change his or her own life insurance so that you are no longer a beneficiary.

q The marital finances. A fairly common problem when marriages run into trouble is that one party will increase the joint overdraft, or credit- card debt, up to the limit, leaving the other person equally responsible for repayment (since such accounts are usually run on a joint and several liability basis, meaning each person can be made fully liable for the whole debt.) It is worth considering whether you want all your savings in joint accounts that either partner can access, thus running the risk that an aggrieved partner may clear out the lot if things go wrong.