Author: Cameron Rueppel, Wealth Management Consultant at Mattioli Woods
Divorce is often described as one of life’s most stressful events, and for good reason. Emotions dominate, while urgent priorities like housing, childcare, and daily stability take centre stage. In the rush to untangle lives, long-term financial planning is often overlooked, sometimes with consequences that only emerge years later.
A fair settlement is about more than just who keeps the family home. It requires a full understanding of all assets, the tax implications of dividing them, and how today’s decisions will shape tomorrow’s security.
Pensions: the overlooked asset
One of the most commonly neglected assets is pensions. For many couples, pensions are second only to property in value, representing decades of savings and valuable tax benefits. Yet they are often sidelined, particularly if one partner has little visibility of the other’s workplace schemes.
Failing to properly value and divide pensions can leave one spouse, often the lower earner or primary caregiver, with a significantly reduced retirement. Options such as pension sharing, offsetting against other assets, or earmarking arrangements should be considered carefully. Ignoring pensions now can create a stark imbalance later, when there may be little time to rebuild savings.
Timing is everything: tax planning
Recent changes to Capital Gains Tax rules offer both opportunity and complexity. Couples now have up to three years after the end of the tax year in which they separate to transfer assets without triggering an immediate CGT bill, an extension that provides crucial breathing space.
This is particularly relevant for investment portfolios, second properties, or business interests. Sequencing transfers strategically can save thousands in unnecessary tax. Where transfers fall outside this window, exemptions and reliefs may still apply, but professional advice is essential.
Looking ahead: estate planning
Estate planning must not be overlooked. From April 2026, changes to the Inheritance Tax landscape may affect many families, particularly those with complex or international assets. Divorce automatically cancels gifts to a former spouse in a will, but it does not update wider planning or beneficiary nominations.
Pensions, life insurance policies, and trusts all need reviewing, with beneficiary designations that override wills and are required to be actively updated post-divorce. Losing spousal exemptions can increase future Inheritance Tax exposure, so restructuring your estate promptly ensures more of your wealth reaches intended beneficiaries. Trusts can also ringfence assets, providing protection for children from previous relationships and safeguarding settlements from future financial difficulties.
Planning for ongoing costs
Families must be realistic about ongoing costs. With VAT added to private school fees, annual costs for some senior schools now exceed £50,000 per child. Supporting education across two households may not be sustainable without careful planning. Agreeing on how fees will be funded, considering education trusts or structured contributions from grandparents, and modelling different scenarios can prevent future strain and conflict.
Divorce may mark the end of a marriage, but it shouldn’t derail your financial future. A holistic, forward-looking approach, supported by expert legal and financial guidance, can ensure today’s settlement will lay the foundation for long-term security, not compromise it.