Blog
18th March, 2025
Pensions and Divorce
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Pensions often get overlooked when couples go through a divorce. Usually, the family home is thought of as the primary asset, but if there is a substantial mortgage on the property it may have less net asset value than previously assumed.
In contrast, pensions can grow to significant worth, particularly those to which an employer makes large contributions. For example, if a spouse’s pension averaged €500 - €1,000 a month in contributions over the last 25 years, the fund could potentially be worth close to €500,000 now. For this reason, it is definitely worth considering bringing pensions into the settlement agreement.
Firstly, It would also be sensible to seek financial advice from a financial advisor to assess all the assets, including the pensions, that could be included in the settlement.
In order to split the pension, it will be necessary to seek a pension adjustment order from the court. This is a specialised order, and the trustees will need to be involved. It can take time to put in place so in our experience, this is a matter which should be addressed early on in the proceedings in order to secure the best outcome for the parties. A solicitor should be able to advise those involved as to how to go about this.
The Tax Implications of Divorce:
Whether you are divorced, separated or married will have implications on how you are treated for tax purposes. For example, for income tax purposes, a separated couple can still be taxed as a married couple, whereas following divorce, former spouses are always treated as two single people.
Inheritance: If a separated person leaves an inheritance to their former spouse upon death, then the former spouse is still eligible for the spousal exemption from CAT. However, a divorced spouse is only entitled to a threshold of €20,000 in respect of inheritance received upon the death of their former spouse.
Succession Planning: Succession rights continue to apply in the case of a separated couple unless waived as part of a separation agreement or extinguished by a Court Order. A divorced couple have no succession rights to each other’s estate. However, the divorced spouse can apply to the courts for share of the deceased spouse’s estate in certain circumstances.
State Pension: In addition, a separated spouse is still entitled to benefit from the State Widows Contributory pension on death of spouse, as is the case for a divorced spouse – provided the spouse claiming the pension has not remarried since and is not cohabiting with someone.
At such a difficult time it’s so important to know where the steps you take will leave you financially in years to come so professional advice should always be obtained.