FOR many Irish couples, the end of a marriage brings a second, quieter upheaval: a financial reckoning that can shape their lives for decades. Decisions about the family home, pensions, tax and future borrowing are often made under intense emotional strain and mistakes can be hard to undo.
Couples who decide to part have three routes open to them. A deed of separation is a private, legally binding contract that settles property, maintenance and arrangements for children without going to court.
A judicial separation is a court order granted on specific legal grounds. Neither ends the marriage. Only a divorce does that and couples must generally have lived apart for two of the previous three years, with no reasonable prospect of reconciliation.
Contrary to popular belief, Irish law does not impose an automatic 5050 division of assets. Instead, the courts aim for what is known as “proper provision” for both spouses and any dependent children.
Earning capacity
They weigh income and earning capacity, the length of the marriage, each person’s contribution to the family and their future accommodation needs. Both parties must swear a full statement of means disclosing income, assets, debts and pensions and understating anything can damage a person’s position.
Pensions are frequently the most overlooked asset in a separation, despite often being the second largest after the family home. Crucially, a private agreement alone cannot bind a pension scheme’s trustees.
A pension can only be legally divided through a Pension Adjustment Order made by the court during judicial separation or divorce proceedings.
Timing matters for tax too. Transfers between spouses are normally exempt from Capital Gains Tax and Capital Acquisitions Tax and that exemption survives a separation for as long as the couple remain legally married.
Once a divorce is finalised, the automatic relief falls away, although transfers directed by the court as part of the proceedings can still qualify.
There is some good news for those hoping to buy again. Under the Central Bank’s “Fresh Start” principle, a person who has separated or divorced and no longer holds an interest in a property can be treated as a first-time buyer.
That means access to borrowing up to four times gross income rather than the 3.5 times applied to second-time buyers, subject to the lender’s own affordability checks.
Given the stakes, expert advice is essential. A family law solicitor is needed to guide the legal process, but a qualified financial planner can model settlement options before anything is signed, value pension entitlements, test mortgage affordability against a new single income and build a plan for life afterwards.
Getting the right advice early can mean the difference between a settlement that merely looks fair on paper and one that genuinely holds up for years to come.
You can contact Lisa Doherty through John F. Loughrey Financial Services on 074-9124002 or by email on [email protected]
