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Separation

separate finances

Deciding to separate from your partner is a tough decision. If you face separation and not across your financial situation, it can be even more overwhelming and scary. It doesn’t have to be. 

Introduction

When you consider finances are a prominent cause of stress for Australians, it is not surprising to hear it is also one of the top reasons for separation and divorce.

Navigating finances can be challenging in a relationship at the best of times — and there’s little doubt the impacts of Covid-19 have added to the pressures.

Most of us don’t plan for separation or divorce. Nearly every aspect of life changes instantly, which is devastating and can diminish your willpower and decision-making skills. Separation is emotionally and mentally draining. It is also rife with practicalities that must be dealt with so that, when the situation calms, you find yourself standing on solid ground between divorce and your finances.

So, how can you prepare and manage your finances for divorce or separation?

How to avoid emotionally driven financial decisions during separation

Separation nearly always impacts your money, undermining the financial planning and wealth-building that a couple accomplishes during a relationship. It can be emotionally challenging to delve into these issues. However, those who neglect financial decisions while going through a separation risk leaving their financial future in the hands of their ex-spouse. There are strategies to avoid this situation and manage your emotions to keep feelings out of financial decision-making when navigating a divorce.

  1. Keep Records and Plan Ahead

Divorce is a complex process. It can be beneficial to confer with legal and financial professionals before announcing your intent to divorce. You will need to have documentation of tax returns, financial statements, wills, trusts, insurance policies, and deeds to property. These items will be required to determine how the finances will be divided. Depending on the amicability of your relationship with your ex-spouse, these may be easy or difficult to retrieve after you start living apart.

2. Work with a Financial adviser

Working with a specialist in divorce finances is the best way to detach your own emotions from the separation process. Unlike divorce lawyers, a financial adviser looks at separation from a fiscal perspective, guiding you through the process to make a clean financial break from your ex-spouse.

Steps you can take to help understand your financial situation

Record all of your questions concerning your financial future. Be sure to include important details and write down everything you need to know, so you can address your questions with your partner and have clarity about your situation.

You may require answers to some of the following questions:

  • Who will offset household payments, such as the mortgage or rent and utility payments?
  • How will you cover the cost of a second dwelling?
  • How will your shared savings be divided?
  • By what method will you handle tax?
  • What alterations will you make to your insurance?
  • If you have children, how will the monetary cost of their upkeep be divided?
  • Will child support be required? Which person will be obliged to pay the other?

If communication regarding the separation has broken down with your ex-spouse, make sure you still write down all the questions you have so you can raise them through your Family Lawyer.

Tips to help you strengthen your wealth over the long term

When considering the implications of your separation, it can be easy to become overwhelmed by the number of things that need to be done and decided on when it comes to your financial world.

Divorce and separation bring with them a series of unique financial challenges, which include:

  • Forming a new budget that accounts for the changes in your financial circumstances
  • Understanding the superannuation and tax implications of a separation or divorce
  • Protecting yourself and your family if something were to happen to your income
  • Making educated investment decisions that are right for your situation
  • Defining financial goals that are specified for your new financial situation
  • Making the most of any precipitous wealth resulting from your separation or divorce
  • Navigating the expenses accompanying children on a single income

When integrated with expert financial advice tailored to you and your needs, a financial plan ensures that you are always on track to achieve financial security and independence.

Correctly understanding what is in your ‘asset pool’, including your liabilities, is paramount to having a clear view of your financial position. ‘Pay attention. Try to get 100% across what is happening.’

Make a list of all your assets, including:

  • your primary residence and any investment properties
  • furniture and other belongings
  • cars and any other vehicles
  • money in the bank
  • shares and other investments
  • cryptocurrencies
  • superannuation
  • inheritances.
  • Make a list of all shared debt, including
  • mortgages
  • personal loans
  • business loans
  • car loans
  • credit card debt.

Note any family or business trusts in one or both of your names.

Compile this information in a central point and, if possible, have your partner agree to the information.

Having a logical understanding of where you stand will help when you engage mediators and lawyers in the future and help make any advice a financial advisor gives you targeted to your situation.

Your family’s second-biggest asset is superannuation, and one should always consider this.

When two people separate and proceed to divide their property, superannuation is treated as an asset and included in the couple’s asset pool under the Family Law Act 1975. However, superannuation does differ from other property types in that it is held in a trust. As a result, one cannot access Super before retirement, but new laws allow superannuation to be divided when a relationship breaks down.

The Morrison Government introduced new measures to assist couples going through family law proceedings, earlier this year.  These new laws make it difficult for parties to hide their superannuation assets throughout the property settlement process.

The recently affirmed laws are designed to ensure candour in property settlements to mitigate the under-reporting of superannuation assets and better the retirement outcomes for women. Superannuation is one of the most considerable assets many people hold. Unfortunately, it is an asset that many have historically tried to conceal or have removed from the overall asset pool in separation proceedings. The new laws are a positive step to ensure property settlement matters can be settled more efficiently.  

Financial abuse and setting new financial goals post separation.

Financial abuse is a largely underreported and somewhat “hidden” form of domestic and family violence.

Financial abuse can involve:

  • taking complete control over the other person’s finances
  • drip-feeding the other person an “allowance.”
  • monitoring every cent the other person spends or forcing them to seek permission to buy certain things
  • one party racking up debt in the other person’s name
  • someone stopping the other person from studying or working to control income
  • someone forcing their partner to sign over assets or take out loans in their name against their wishes.

In many cases, victims of financial abuse feel trapped and powerless, and they can’t see any way out of their situation.

Women who have suffered financial abuse during a relationship will often face financial hardship during separation or divorce.

Suppose a woman has no control over finances or has significant debt in her name. In that case, she can find it difficult to secure housing and financially support her dependents. Additionally, she may not be able to pay for legal representation for a property settlement or other family law matter to try to move forward with her life.

In some cases, the financial abuse may not have happened before separation and may only begin after separation. For example, abusive behaviour may show when a former partner ceases access to bank accounts and credit cards, conceals assets, empties joint bank accounts, or abnegates to pay joint debts or child support.

Property settlements can take time to negotiate and come to an agreement, which means during that time, the non-financial party can lack the funds they need to support themselves and their children whilst waiting for a settlement to finalise. In many cases, the non-financial party can claim spousal maintenance from their former partner to help them meet their weekly financial expenses.

It is essential to also obtain legal advice from a family lawyer who specialises in this area of law and has the proficiency to handle matters that involve family and domestic violence. A family lawyer can procure urgent spousal maintenance, assisting with immediate financial support until a hearing takes place for spousal maintenance orders and property settlement arrangements.

These are just some of the issues that are contemplated by those who find themselves in this situation which may cause them hesitation in taking the necessary steps to be free from their partner who is causing them harm.

Vogue Advisory Group – helping families maintain financial awareness before, during and after separation

People’s single biggest mistake is waiting too long to seek legal and financial advice. We know that separation and divorce can disrupt your financial plans. So we help you get back on track by working with you to define clear financial goals and construct a plan that will ensure you can achieve them.

It can be difficult to know where to begin planning for your future with so much at stake. We help by providing you with direction and clarity, no matter how ambiguous your situation is.

Your adept financial advice team is always in your corner, ensuring you can rest assured knowing that your finances are looked after.

After all, finding financial stability and achieving financial security is easy with your trusted financial advisor only a phone call away. Contact us any time.

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