01 Aug A Complete Guide to the Dos and Don’ts of Financial Separation
We often hear about the negatives of a divorce or separation. But navigating financial separation can also be a transformative journey. It can offer you a fresh start and new opportunities for personal and even financial growth.
Of course, it helps to understand what financial separation involves so that you can be fully empowered to take control of your financial future with confidence. This guide will set out practical tips and strategies – including the dos and don’ts – of financial separation and ensure that you come out the other side financially stronger and more secure.
What is financial separation?
Most of us understand that separation generally means the end of a romantic relationship. That could be a de facto relationship or a marriage.
In the same vein, ‘financial separation’ simply refers to the end of the financial relationship between the couple. This means that property, assets and savings will no longer be shared between the couple but will be divided, as required by The Family Law Act 1975 (the Act), equitably and fairly.
Financial separation is an important step in the divorce or separation process. It helps the partners to untangle themselves financially and move on with their lives. However, it is important to understand that financial separation is a completely separate process from divorce or separation generally. A couple can divorce without financially separating. So it will need to be handled separately.
The dos and don’ts of financial separation
DO Start the process as soon as possible
While the idea of a financial separation may be overwhelming, it’s best to begin the process as soon as possible. Avoiding it could leave you open to risks, especially as the asset pool – the things that form part of your marital property that will need to be divided – changes over time. And what goes into the property pool is determined on the date you agree your property settlement occurs or your trial date , not on the date of your separation or divorce.
There are also time limits in place under the Act. De facto partners have two years from the separation date to complete their financial separation, while married couples have one year from the divorce order date.
DO Understand your financial situation
In our experience as family lawyers, we’ve found that there’s often one partner in a couple who is in charge of the finances. The other partner tends to take a backseat and has less involvement and understanding and this could be because they are taking on the task of caring for the children etc. It is not uncommon for couples to share these tasks.
If you’re the partner who hasn’t been in charge of the finances, or you’re not sure about your financial situation for any other reason, now is the time to remedy that. It’s crucial for both partners to fully understand their financial situation and have full access to their financial records.
Begin by gathering as much information as you can ASAP. This includes everyday bank accounts, savings, loans, credit cards, shares, trusts, debts, superannuation, property, vehicles, loans, interests in companies, inheritances, gifts, debts and more.
DO Keep an eye on the shared asset pool
Most people would never believe that their ex-partner could do something as sneaky as hide money or assets… until they do. Emotionally charged situations can cause people to act differently. Resentment and anger in particular don’t help us to be the best version of ourselves.
While most people don’t hide assets (it’s illegal after all!), it’s best not to assume anything in the course of a divorce or breakup. So you should monitor your bank accounts and assets to ensure that nothing dubious occurs.
Change the passwords to any personal banking and email accounts, and set withdrawal limits on shared accounts. Also keep an eye on any shared assets that could be sold like cars, boats or caravans.
DON’T be unethical
We hope it goes without saying – but we’re going to say it anyway! Don’t do anything illegal or unethical with your finances.
Trying to hide your assets in other accounts or by transferring them to other people is illegal and will likely not end well. It could even end up in imprisonment. This is not the time to be selling off assets or withdrawing funds without the other party’s consent. This could end very badly for you.
DON’T lose sight of the end goal
Most separating couples actually want a smooth, amicable process. One that results in an equitable outcome and minimises the time and money spent in court. But it’s easy to lose sight of the end goal. The key here is to remain transparent, amicable and respectful. Particularly if you have children to consider.
Creating drama, fighting with your ex-partner and talking badly about them in front of your family or children will only shut down communication further. This can stall the legal process and delay both parties from moving on with their lives.
While it’s hard to separate the emotions from the situation, it’s vital to be as level-headed as possible. This will help you to make good decisions, state your case clearly and have your case resolved as quickly as possible.
DON’T do it on your own
Financial separation is a complex and detailed process. While some parties may choose to wade ahead on their own, we strongly recommend seeking expert advice.
Not only should you consult an experienced family lawyer, but also financial advisors and accountants if possible. This is especially important if your asset pool includes shares, investments or interests in companies.
You’ll want to choose a family lawyer who is a good communicator, transparent, skilled at what they do and driven to get you the best result. We can help! As a starting point, browse our free online resources for a wide range of articles spanning divorce, separation, property law, family law and much more.
As family law and divorce specialists, our team can support you through this challenging time with objective advice. We can guide you to achieve a fair outcome with minimal stress during your financial separation.
Get in touch with Toomey Family Law today.