How to financially separate from your spouse

Apr 01, 2023
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Once you’ve decided to move on from your relationship, separating emotionally from your partner is only one part of the process. 

But what about your finances? They can be complex to deal with especially if you have been in a long-term relationship and have accumulated substantial assets and liabilities over the decades.

Note the Date of Your Separation 

Before you even begin to organise your paperwork, gather documents and update bank accounts, make a note of your separation date. Remember, before you can apply for a divorce, you need to have been separated for 12 months, which begins from the separation date. 

Do A Financial Stocktake

The next step is to do a financial stocktake to assess your current situation, listing all your assets and liabilities. Assets will include bank accounts, investments, properties, businesses, household goods, vehicles and superannuation. Liabilities include mortgages, loans, credit cards and any other debts.

It is important to ascertain values, as all these will form part of the calculations for the asset pool to be divided.

Decide On New Living Arrangements

Another important aspect of separating is to decide on your new living arrangements. You have to decide with your ex-spouse or partner who goes where and who stays. If you have children or grandchildren in your care, you need to decide how your separation will affect them and their living and care arrangements. Ideally, all these arrangements have been made before separating.

Get Professional Legal and Financial Advice

Although you are not legally obliged to get professional legal advice when separating, many people have little understanding of the intricacies of Family Law. Considering what is at stake, obtaining legal and financial advice and, at least, having an idea about your legal rights and obligations is strongly recommended.

If you’re having difficulty calculating the values of any of your assets it also makes good sense to seek financial advice.

Restructure Your Bank Accounts

If you have joint bank accounts they should be closed so one person cannot access the funds alone. This applies to loan accounts and credit card accounts too. Change all your passwords and pin codes to any online bank account.

The other option is to add joint authority so you both need to authorise withdrawals. 

Review Your Joint and Individual Financial Responsibilities

Once you have agreed as to who pays for what going forward, you need to review your financial responsibilities. Who will cover payments for health insurance, ongoing mortgage payments, debt obligations or superannuation contributions?

Update Your Accounts, Debts, Estate Planning and Insurance

Updating your financial position is important, especially if assets/liabilities are in both names. Joint accounts mean that both account holders are equally responsible for the debt and, if one party fails to pay, the other can be responsible.

Your will, insurance policies and superannuation arrangements may also need to be updated. Many couples appoint their partners as executors and beneficiaries to their wills and super, so all that has to be updated too. Otherwise, in the event of your death, your ex-partner may end up inheriting everything. 

Don’t forget to change your Power of Attorney, if you have one in place.

Create A New Budget

To have a clear indication of what your new lifestyle will be like, you need to create a new budget. List all your forms of income, such as salary and investment income and all future expenses, such as rent or mortgage payments, utility bills, debt, insurance and all other living expenses.

If your expenses are higher than your earnings, some serious lifestyle changes may need to be made to ensure you live within your means. Separating the needs from the wants is a good place to start.

Don’t Try To Hide Your Assets

Whether you separate through mediation or by litigation in the Family Court, all assets and liabilities must be declared, so the splitting can be done in a fair and equitable manner as the law requires. If it is discovered during or after the separation process that either party has hidden assets or has falsified the values of any assets, any Orders that have been made may be set aside by the Court. 

Discuss Spousal Support Payments

Ongoing spousal maintenance is something that you may need to discuss and reach an agreement. 

When it comes to spousal maintenance, not many people realise that under Family Law, parties may have an obligation to support financially after separation. A party needs to show that they are unable to reasonably sustain themselves before any payments can be ordered. Once again there is no one-fits-all formula in calculating the amount, but much depends on the needs of the receiver and the payer’s ability to pay.

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