With 1 in every 3 couples in Australia divorcing or separating before the 10-year mark, financial separation is something many people find themselves navigating, usually under emotional stress.
Financial separation, also known as a ‘deed of settlement’ or ‘property settlement agreement’, is usually the first step towards divorce. In recent years, they have also become an emerging alternative to divorce.
In this article we will discuss:
- What is meant by financial separation?
- Separation and finances.
- Financial separation tips.
- Where to seek financial separation advice.
What Is Financial Separation?
A financial separation differs from divorce in that it is reversible should both parties decide not to continue through to divorce – it can make up part of divorce financial planning, however. A financial separation does not make provision for custody arrangements if children are involved; this is covered by a separation agreement.
Financial separation refers to a legally binding and enforceable document that lays out the terms for the division of assets between two people. In more simple terms, it’s the document that says who gets what when a couple part ways.
Things that may be covered in a financial separation agreement include property, cars, boats, bank accounts, superannuation, personal effects – from coffee cups to jewelry – as well as any liabilities. Debts such as mortgages and credit cards will also be taken into account.
The Family Law Act refers to this as a binding financial agreement or BFA, which can be entered into at any time during a relationship. A BFA provides financial certainty and clarity regarding the division of accumulated assets.
Separation and Finances
Separation and finances can be incredibly messy. Separation is an emotionally charged time and things can quickly become fraught with stress. A financial separation document can provide many benefits such as:
- Protecting both party’s interests and assist in keeping relationships amicable. This is particularly important when children are involved.
- Can keep the matter out of court, which is significantly more stressful, time-consuming and expensive.
- Eliminating the risk of future property disputes and allowing both parties to move forward with a clean break.
- Can save you money on stamp duty, capital gains tax (CGT) or transfer of property.
Tips For Navigating Financial Separation
Our financial separation checklist is by no means exhaustive but can help you begin the process towards a less complicated separation.
1. Prepare Your Paperwork
Before you do anything else you should organise your paperwork. Collect and put aside all personal and financial documents. These include marriage and birth certificates, bank records, superannuation and loan statements, insurance policies, tax records and more.
2. Seek Financial and Legal Advice
Before agreeing to anything, it is recommended you seek both financial and legal advice. This will ensure your interests are properly represented and accounted for. Having professionals on your side can also help to reduce stress and provide support during a challenging time.
3. Update Your Accounts
Close any joint accounts and cancel any joint credit cards. Update your bank (change PINs if necessary) and your superannuation payout directives. You should also update Medicare, your health fund and any personal or life insurances you have. Most importantly, you should update your will and powers of attorney.
4. Address Repayments
Review all direct debits and ensure they are linked to updated accounts should joint ones be closed. Decide who is responsible for repaying what until your binding agreement is settled. Do not risk damaging your credit rating by missing repayments.
In the case of mortgages, you should advise your bank that you are in the midst of a separation and direct them that both signatures will be required for any changes or withdrawals.
5. Reassess Your Expenses
With reduced income comes the need to budget and reassess your spending. Write down all your essentials and work out your new weekly budget. Be sure to include any debts you are responsible for. This can also aid in determining a fair financial separation and proper division of assets later down the line.
How Collins Mann Can Support You Through Financial Separation
At Collins Mann, we understand what an emotionally charged time separation can be. We work to support our clients to protect their interests, providing advice, guidance and strategies for a secure financial future post-separation.
We are fully qualified and licensed to work alongside your legal representative towards a fair and equitable financial separation. Let us help you keep your stress levels down, finances secure and promote a more amicable split during a difficult time in your life.
Keep the experts in your corner: call Collins Mann today on 07 3251 3200 to learn how we can help you through financial separation.