Cohabiting and separated? How to sort out your finances

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In 2013, figures released by the Office for National Statistics revealed that the number of couples choosing to cohabit had risen by 30 per cent in just ten years. Unfortunately, not all relationships work out, and though cohabiting couples that part company won't need the services of a divorce solicitor, many face the unenviable task of sorting out their shared finances when separation occurs.

If you and your partner are going your separate ways and don't know where to start, here are some tips on making the break-up (financially, at least) as painless as possible, and what to do in case of a dispute.

Basic finances
Before you start trying to decide who gets what, you'll need to make a detailed list of everything you own, as well as any shared debts or savings you may have. If one or other partner is set to remain in the once-shared home, make sure you get final bills from utility providers so that you can clear the current debt between you, and similarly, arrange for any insurances that are in both names to be switched to just one.

If you have a joint bank account, it's advisable to speak to the bank or building society as soon as possible. Should you decide between you that there are some bills that you will continue to pay jointly, then you may want to change the way the account is set up so that both parties must agree to any money being withdrawn or overdraft limits changed, thereby preventing one person to run up further debts or empty the account. If you fear things might turn nasty, you can also ask the bank to freeze the account, meaning both parties will need to sign a letter to regain access. For those who are able to divide up the money and have no outstanding overdraft, it's sensible to close any joint accounts. Each party should set up their own account for wages, benefits or personal debts.

Personal possessions
From electronics and appliances to furniture and cars, all your possessions will need to be divided fairly, and where possible, you should try to reach a positive agreement. Start by thinking about where you will each be living. This will help you to decide how to divide larger items such as furniture, electronic items and appliances, as one party may need to furnish a new property. It may be that one party needs the family car more than the other, either for work or family commitments, but it may be possible to reach an agreement whereby other household items are given up in exchange. With expensive items such as jewellery or collectibles, it is wise to get an expert valuation before you decide whether to buy your ex-partner's share, or sell and split the money equally.

Dividing property
Dividing the home, whether you have bought or rent, can be a tricky business, but there are a variety of options. Selling the home may be the easiest route, since the proceeds can be divided equally, or split fairly so that if one party paid the deposit, they can recoup the loss. Alternatively, if you have a mortgage but one party wishes to remain in the home, you will need to arrange to buy the other out, or transfer part of the value. The partner who no longer 'owns' the property would still have a stake in the home, so that should it be sold in the future, they are entitled to a percentage of the value.

Bear in mind that if you had a joint mortgage and would like one name removed, you will need to talk to your lender so that they can ensure you will be able to afford repayments as an individual. The advantage of this route, however, is that should one or other party run up debts or fail to keep up repayments on the mortgage, you will no longer be tied in terms of credit rating. If you rent the shared home, you should advise your landlord or letting agent that only one name will remain on the tenancy agreement.

Custody issues
Above all, it is essential that you work together to consider what is best for your children, if you have them. Try to come to an arrangement with regard to financial support for the children, and think carefully about who is best placed to care for them on a full-time basis, i.e. if one partner is to remain in the shared property, it may be less disruptive for the children if they too stay put, with visitation arranged to suit both parties. You should also consider what is best for any pets, taking into account who will have the time and money to properly care for them, and whether the children are emotionally attached to them.

Sadly separation doesn't always run smoothly, and some couples find it almost impossible to agree how to split their assets fairly. If that is the case, you can seek help from an impartial third party such as a mediator to aid in the process and arrange an agreement that is acceptable to all. Where things are more complex - for example, if only one party's name is on the mortgage but both have been contributing to repayments - legal advice may be necessary.

Have you recently split from your partner? How did you manage to sort out your finances? Leave your comments below...
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