Dividing investments and savings during divorce or dissolution

Investments and savings can be taken into account as part of your overall financial settlement.

But some assets might not be treated the same as others – for example, money or property you or your ex-partner (husband, wife or civil partner) inherited or owned before you married or entered into your civil partnership.

Generally, only investments or savings you and your ex-partner have built up during your marriage or civil partnership are taken into account as ‘matrimonial property’.

But any increase in the value of investments or savings you or your ex-partner had before you got married or entered a civil partnership could be taken into account in some circumstances.

This can be a complicated area. If you’re in any doubt, it’s worth getting professional advice.

The process of separating your savings might be different, depending on the type of account you have and whose name it’s in.

You might have the following:

These can only be held in one person’s name – and not jointly.

If you want to give your ex-partner money from your Cash ISA, you’d have to take out the money you want to give them.

You couldn’t transfer the money from your own ISA directly to theirs.

With a Lifetime ISA (LISA), you could take out the money you need but you’ll have to pay a withdrawal charge. As with a Cash ISA, you couldn’t transfer money in your LISA to someone else’s. 

Savings accounts are straightforward as you could simply transfer some money from your account to your ex-partner’s.

The only difficulty might be if the money is in an account where you have to give notice. If that’s the case,  talk to your bank or building society to understand your options to take out your money. If you don’t, you could lose some of the interest.

If the money is in a fixed-rate savings account, you might not be able to cash it in before the term is up. Even if you can, you might lose a lot of interest.

Some National Savings & Investments (NS&I) savings accounts allow instant access to your cash, while there might be a charge if you wanted to cash in a fixed-term bond early. 

If you've opened a Junior ISA account for your child, then this money will be in your child’s name, and belong to your child.

But the savings held in your child’s name might be included in your joint financial assets. For example, if one parent moves money from their own account into your child’s account in order to try and exclude the funds from any financial settlement. 

When you know the result of your financial settlement, you’ll need to work out what you want to do with your investments – for example, whether you want to sell, continue owning, or rent out a buy-to-let property or a holiday home.

Contact your lender if you need to take your or your ex-partner’s name off the mortgage. If you think you’ll need to remortgage, it’s worth considering talking to a mortgage broker/adviser.

You should be sent a statement every year telling you how much your investments are worth.

But this might not be same as the amount you would get if you cashed in or transferred your investments.

Instead, depending on the type of investment, the value might be the:

• transfer value, or
• surrender (cash-in) value.

You first need to ask the investment company for an up-to-date valuation, or transfer or surrender value.

You might have:

• bonds
• investment bonds
• stocks and shares ISAs
• with-profits policies, such as an endowment
• unit trusts, investment trusts or OEICS (open ended investment companies).

Cashing in your investments might not be the best option, because you might have to pay tax and extra charges:

• You might have to pay Capital Gains Tax (CGT) if you cash in or sell an investment and make a profit. You have an annual CGT allowance, which means you can make a certain amount of profit – after selling costs and fees are deducted – and not pay this tax.
• You don’t have to pay CGT when you’re selling your main home or stocks and shares ISAs. This is a complicated area so it’s probably worth getting advice from an independent financial adviser or accountant. But you’ll have to pay for their advice.
• Depending on the investment you have, you might have to pay charges if you sell or cash it in early. Even if you don’t, you might lose out if you sell share-based investments when the stock market is low.

If you own shares, you can either transfer them to your ex-partner or sell them so you can give them the money instead.

It’s worth getting advice from an independent financial adviser or accountant about which is the best option.

• You can transfer shares to your ex-partner by filling in and signing a ‘stock transfer form’ (also known as a ‘J30’ form). You might be able to download this from the website of the company you own shares in.
• If you have a stockbroker (or use an online stockbroking firm), they can arrange to sell the shares for you. Make sure you find out how much this will cost. You might also be able to sell through a share-dealing service offered by the company whose shares you own. Not all companies offer this service.

Usually, if you give away something like an investment that you’ve made a profit on above your CGT allowance, you would have to pay this.

But you can transfer investments, such as shares or investments, to your ex-partner during divorce or dissolution, without paying CGT.

To qualify for this exemption, you must do it in the tax year – from 6 April to 5 April the following year – that you separate.