Should I downsize when I divorce or keep the house?

cottage on money_Images_ Of_MoneyIf you and your spouse have decided to split the joint assets it’s very easy to think that how you achieve that split will not affect the outcome. Will it make a difference if you remain in the house and don’t take any other assets compared to if you downsize now and take a share of other assets?

At first glance it cam seem that the 2 options are exactly the same provided in each case you end up with your appropriate share. But in fact this is not the case.

In the resources section there is an example divorce scenario of Sally and Simon Smith to highlight that how you split the assets does in fact make a real difference.

In scenario 1 the assets are split 50:50 and Mrs Smith is awarded the family home. She retains her own pension and investment holdings but does not have a share of any other assets.  Under this scenario and based on the assumptions made she runs out of money at age 74.

In scenario 2 Mrs Smith is again awarded a 50:50 split of the assets but chooses to downsize at the time of the divorce. She retains her own pension and investment holdings but also receive a share of Mr Smith’s pension.  Under this scenario she runs out of money at age 83.

The example has been based on a made up set of figures because if Mrs Smith were to run out of money at age 83 some additional financial planning is required to ensure her funds can last longer.

However, what this example highlights is how important it is to look at how long your funds will last, even once you have agreed a split. Being awarded full value of the family home will not necessarily give you the same outcome as downsizing and being awarded further cash or pension share.

The details of the case study and the workings are shown here.

If you are going through a divorce and need help with your financial negotiations please call me on 01932 698150 for a confidential chat.

photo credit: Flickr/images-of-money

Mary Waring is a Chartered Accountant, Chartered Financial Planner and Money Mindset Coach, helping women transform their relationship with money so that they can become free and powerful. She is also the bestselling author of "The Wealthy Woman: A Man is Not a Financial Plan."

Read More

If you enjoyed this post, we recommend the following as additional reading. 

What mortgage will you be offered following divorce?

Mothers who work part time or work in a low paid job to be able to fit their job around general child care, will often struggle after divorce to be eligible for any reasonable sized  mortgage from a bank or building society. . Even if your partner has left the marital home and you have…

Read More about What mortgage will you be offered following divorce?

Changes to the State Pension 2016. What it means for you.

With effect from 6th April 2016 a number of changes are taking place with regard to State Pension. Anyone who is already claiming their state pension and those who reach state pension age by this date will remain under the existing rules.  This group will not be affected by the changes. Those who reach state…

Read More about Changes to the State Pension 2016. What it means for you.

Pensions & Divorce – earmarking

Earmarking was introduced for petitions for divorce filed on/after 1st July 1996. Under this method the court allocates a specified portion of the scheme member’s lump sum, death benefits and income entitlement to the ex spouse. This is evidenced by an order from the court to the trustees. The ex spouse will then receive the…

Read More about Pensions & Divorce – earmarking