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FINANCE CHILD PROTECTION

Debt

✒ Details of your respective incomes. Amount of savings and a rough idea of the value of any other assets

Jointly owned or not, including pictures, jewellery and cars.

Pension details Ask your pension provider to give you an up-to-date transfer value.

Income needs Work out a schedule of your monthly needs for items such as food, clothing, petrol, travel, mortgage, utility bills, childcare and school fees.

What happens next?

From a legal standpoint, there are three aspects of divorce: the main divorce suit, arrangements for the children and financial matters. Divorce petitions are rarely contested and parents can often resolve issues relating to children without court proceedings, but financial matters do need a court order to make any settlement binding. Good legal advice is important in securing a fair division that reflects each party’s financial position and respective needs, including the needs of the children, then ensuring that the settlement is reflected in a court order.

The court’s approach

Whether the court is approving a previously agreed settlement, or deciding what to impose, it has power to make a range of financial orders to deal with matters such as:

What will happen to the family

home? For example, should it be sold and the proceeds used to buy a smaller mortgage-free home for the main carer and children?

Maintenance for a

spouse. Should it be paid in, for example, monthly installments or one lump sum?

Debt culture

A large mortgage, personal loans, credit cards and store cards. Perhaps our grandparents would turn in their graves at the amount we borrow, but living with and handling debt is the way of the modern world.

Ensuring protection

Having debt is not a problem in itself – as long as you can meet the repayments. The key is working out what you can afford, making sure it is manageable and having a plan that will see everything paid off. But what happens if you lose your job or become ill and cannot work? A number of insurance schemes are available which offer help, although some have been subject to controversy. The main concern of

householders is that they should cover their biggest monthly outgoing, usually the mortgage payment. With unemployment rising, mortgage payment protection insurance (MPPI) and accident, sickness and unemployment insurance have become more attractive. MPPI will usually pay your mortgage if you lose your job

but make sure you read the small print. Does the insurance pay straight away, after 30 days unemployment or after three months? How long will it pay out for? What exclusions are there? Currently, the Financial Services Authority says one million customers who took out MPPI insurance to cover their mortgage payments should receive refunds after ruling the contracts were unfair. Similarly, payment

protection insurance sold with, for example, a loan or credit purchase agreement, has also come under fire because of its cost and fairness. That is not to say it is wrong for everyone, but the devil is in the detail.

The alternatives

An alternative is income insurance, which will pay up to 65 per cent of gross salary. This is usually limited to 12 months if you are made redundant but it will pay out until retirement if you cannot work because of accident or illness. Another option is critical illness cover, which will pay a tax free lump sum on diagnosis of life- threatening conditions.

Having debt is not a problem in itself.

Te key is working out what you can afford

Children. Although spousal maintenance and property issues are also part and parcel of ensuring a secure home and income for them, in

54 FIRST ELEVEN SUMMER 2010

most cases, child maintenance is dealt with separately by the Child Support Agency (CSA). The court does have the power in divorce proceedings to make orders in respect of school fees, but do be aware that the court’s approach will be to regard school fees as secondary to the overall need to meet the children’s housing and maintenance requirements.

The court will consider all relevant factors in making a financial order, including your respective incomes and earning capacities, financial resources, needs, obligations and responsibilities. Different considerations apply

Whatever insurance suits

your personal situation, it pays to shop around for a good deal as the cost of premiums can vary widely depending on factors such as age, family situation, health and habits. Go to a price comparison website such as confused.com – and remember to check the small print for conditions and exceptions before you sign up. Should you ever find

yourself with payments you cannot meet, don’t ignore them. Speak to your mortgage holder and see what arrangement can be negotiated. Independent schools will often have a contingency plan for parents who are struggling with fees.

depending on the ages of the children. The younger the children, the more likely it is that the main carer will need to stay at home to look after them and the financial provision will need to reflect this. If your children live with you,

the calculation of your maintenance entitlement will reflect this fact, so find out what you might expect and use it to inform your negotiations. Although there are circumstances where court proceedings are necessary, it may also be necessary to accept a compromise for your children’s sake. This can help avoid a lengthy and distressing court dispute. %

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