Wealth

Controlling your finances after a divorce or separation

When a long-term relationship ends, there are sure to be financial knots to untangle. This guide can help.

The end of a marriage or de facto relationship can play havoc with your finances as well as your emotions. Sorting out money, property, superannuation and more can feel overwhelming – and that’s where this checklist can help. 

Russell Kapeechkin knows just how hard it can be to focus on finances when a relationship has broken down. As Senior Financial Adviser at Australian Unity, he has helped many clients to navigate this difficult time.

“The first things I ask are whether the separation was amicable, and whether there are children involved,” he says. “The answers to these questions strongly influence how things progress. If it was amicable, the financial separation can be quite straightforward. If not, I do my best to provide guidance in a respectful and supportive way that will keep friction to a minimum.”

Whatever the circumstances, it’s helpful to understand the steps you need to take to make the most of your new situation and start building a new future.

1. Gather up your paperwork

Before you can separate your finances, you’ll need to collect all of the relevant paperwork. 

“This includes your bank and loan statements, mortgage and car documentation and information about superannuation, tax and investments, as well as recent bills,” says Russell. “It’s a good idea to keep them together in a safe place with other personal documents, such as your passport, birth certificate and marriage certificate.”

2. Revisit your beneficiaries 

It’s easy to overlook your will when you have so many other things on your mind. However, as Russell points out, it really needs to be a priority.

“You want to be sure your assets would go to the right people if you should pass away,” he says. “That means updating your superannuation and insurance policies, too. For instance, you wouldn’t want your money to go to your former partner and their new family rather than your own children.”

3. Separate your accounts

If you have any joint accounts, either close them or change them to “both signatures only”. If you don’t already have a transaction account in just your name, you’ll need to open one for your salary and any other income.

“It’s also important to check through any agreements you’ve signed,” says Russell. “Remove your name from any you legally can.”

 

4. Organise the mortgage

For most couples, their home is their biggest asset. If you have a joint mortgage, you and your ex will have to decide whether you’re going to sell your home outright and divide the proceeds, or if one of you will buy the other’s share of the property.

In the meantime, you will need to continue repayments to protect your credit score and avoid defaulting on the loan. Remember: if you’re thinking of refinancing and taking on the debt yourself, the first thing the lender will look for is a good payment history.

If you do agree that your former partner will take over the remainder of the outstanding debt, make sure your name is removed from the loan agreement.

5. Create a realistic budget

Most divorces and separations have a significant financial impact on the people involved. 

“In effect, your income could be halved and that’s never going to be easy,” says Russell. “Drawing up a realistic budget can help you to stay in control. It will also highlight any changes you might need to make to your lifestyle.”

The paperwork you gathered for step one will help you work out your new financial position. ASIC’s budget planner is also a useful resource.

6. Seek professional help

A licensed financial adviser can help you to navigate the financial complexities of separation and divorce. They can also help you to restructure your finances so you’re well-placed for a secure future.

You may also benefit from a lawyer’s help, particularly if the custody of young children is involved, or there are disputes around the division of property and assets. Even if the split is amicable, your former partner should employ their own lawyer to avoid possible conflicts of interest. 

7. Take care of yourself

Beyond Blue describes separation and divorce as being among the toughest experiences you will ever have. It can take a while to fully recover and, in the meantime, you need to take care of yourself along with your finances. 

“It’s easy to feel very alone, but there are always resources you can draw on,” says Russell. “I think it’s important to acknowledge this is a difficult time and not be afraid of asking for help.”

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