For many individuals, facing a legal separation is an emotional burden that comes with fears and uncertainties. Nevertheless, the financial aspect of separating your life from your spouse is just as critical and sometimes even more complex. Your actions could even cost you financially well into the future.
Build a complete picture of the marital asset pool
Before you lodge a property settlement application, you must first determine what property is available for settlement. The property pool includes everything the separated couple owns and is put in the same pool for division between the two of you.
Common types of property include real estate, bank accounts, motor vehicles, shares, and superannuation. If you run a business or have a family trust, these can also be considered property, and their value will need to be included in the pool. Any property owned by a company or trust may also still be part of the pool available for division, depending on the circumstances.
On the liability side, all mortgages, credit card debts, personal loans, and tax liabilities should be disclosed.
To be sure of what should be included, seek legal advice. But, in general, the rule is, if it was obtained during the relationship and/or is legally in at least one of your names, it likely counts.
If you think your ex-partner is likely to hide assets or transactions in their name, or you suspect a third party holds an asset for the benefit of one of you, let your lawyer know. Working with a family lawyer Sydney can help you understand what evidence you will need to provide to show that the asset is still part of the pool for division.
Create financial independence now – not later
A practical first step is to get your finances apart. Open a bank account in your name only and have your income paid into that. If you don’t already have one, apply for a credit card in your name alone. This isn’t adversarial. It’s just that for many people this is the biggest financial risk they’ll face: one party draining the joint accounts or taking on new joint debt before any legal protections are in place. The fact you’re separating makes no difference to your lender: joint-and-several liabilities remain joint-and-several until they are formally unwound, and any missed payments hit both your credit ratings. Tell your bank you are separating and ask what their process is for making joint accounts less vulnerable to unilateral large withdrawals. Most banks have a process for this.
Paperwork is preparation
Both parties have a legal obligation to provide complete financial information – full and frank disclosure. It is not optional, it is taken seriously by the courts and tribunals and there is significant legal risk in failing to disclose all your assets.
So, you better start collating three years’ worth of tax returns, pay slips, and bank statements and gather all your records of any major financial transactions. If your matter does go to court you will need to do a Form 13 Financial Statement which will require you to disclose all your income, expenses, assets, and debts. If you have organised this documentation in advance, there will be a lot less scrambling around come crunch time.
Property settlements in regard to a legal separation can take many months to complete due to the complexity that it involves. That’s a long time to wait before you get your full financial position. The settlements that are much faster often involve clients who have come in prepared.
Check your beneficiaries and update your documents
This is one of the most underrated steps. Just because you separate, it doesn’t void the previous beneficiary on your super or life insurance. Your ex could still be the legal recipient and will until you update it.
Jump online, get your superannuation statement, and check who you’re leaving the balance to if you pass away. Do this for every super account you have. Do the same for each and every insurance policy – life, income protection, trauma insurance. Get your will updated. These aren’t grand acts of a newfound single life; these are simple admin tasks to make sure the things you’re aiming for come to pass.
While we’re at it, superannuation splitting is a thing. Super is seen as an asset under family law and can be split as part of a settlement. The more you understand the starting superannuation balances and structure of your super (not all of it may be on the table – super built up before the relationship was a thing might be excluded) the sooner you’ll have an idea of what you’re both dealing with.
Know what your separation budget looks like
Estimate your post-separation costs and get professional advice on what your settlement may look like. In theory, it can change as you move through court proceedings. In practice, you want clarity on where you stand as quickly as possible.
Landing the final point
Getting your affairs in order may feel like a daunting prospect at the moment, but it is more straightforward than you might imagine, even when emotions are running high. The best starting point is to assemble as much information as possible and use it to build a strong foundation. This can start immediately after you’ve made your decision to separate.
