When is the right time to get advice?
There’s no bad time to seek financial advice. But here are five situations where it’s more important than ever.
Shock, fear, rage, pain, sadness and disorientation – separating from the person you imagined growing old with is one of the most traumatic life events you can weather.
“All of a sudden your life is thrown up in the air, it's very scary,” says Jo whose marriage ended in 2015, almost 20 years after tying the knot.
“It wasn't amicable – there was someone else involved – and I would imagine that like a lot of women my age (53), I was in a state of shock and didn't know where to start.”
At such an emotionally-charged time, having good advice – both legal and financial – can make a world of difference to the new life you emerge with.
A prenuptial or Binding Financial Agreement (BFA) needs to be looked at as an important protective measure, not a jinx on the relationship, says Lisa Duggan from Epona Financial Guidance.
The Family Law Act allows a number of different situations in which a BFA can be put in place, including during the relationship.
When her own marriage broke down, Duggan did not have a BFA in place, but she didn't overlook it a second time.
“It's a really hard subject to raise – a lot of people feel like you're dooming the relationship or not trusting the other person,” she admits.
“But my current partner was fine about it – he understood the logic.”
Duggan says BFAs are particularly important if you're entering a relationship involving blended families, or quite different asset or liability positions.
Another mistake Duggan commonly sees is letting your partner deal with the finances.
“You become ignorant of what you've got, and where, which makes things really difficult if things turn nasty,” she says.
Jo found herself in exactly that position.
“My ex-husband had taken care of financial matters and was very controlling with money so I lost confidence in making financial decisions for me and my family.”
Getting the 'right mix' of assets
If you reach the point where your relationship is beyond repair, it's wise to bring in professionals such as a family lawyer and financial adviser.
Left up to you, you may fight tooth and nail to keep the holiday home for sentimental reasons, or stubbornly refuse to accept anything less than a 50/50 split as a matter of principle.
But, as Triple A Financial Services founder Ashley Hann says: “A divorce settlement is as much about taxation, and which assets are most suitable for the client, as it is about getting the higher percentage of assets.”
Insurance is another important financial factor often overlooked in a split
Getting the investment property or certain shares, for example, could leave you with a nasty tax bill if they're loaded with capital gains or it could push you into a different tax bracket.
Federal law provides a number of basic formulae for calculating child support obligations, but you can agree to a more bespoke agreement that takes account of the family’s situation and, in particular, future support for the children.
It is important that each partner hires their own financial adviser and family lawyer to explain the options available and the benefits and risks of each option.
Insurance is another important financial factor often overlooked in a split, notes Hann.
“If your partner was paying for it, you may be cut off when the divorce comes through or if you're no longer eligible for family cover,” he says, adding that it's also good to review the levels of cover.
“If part of the reason for your life insurance was to pay off the family home but it's being sold or your ex is getting it, you may not need as much cover.”
You should also consider notifying the bank you've separated, disentangle yourself from any liabilities and make changes to your will, estate documentation and power of attorney.
Perhaps the most important thing, both financially and personally, is getting on with your new life.
The sooner the financial separation is behind you, the sooner you can start making new plans.
“We help with income, financial commitments, developing budgets, whether you should buy or rent, what happens when child supports run out, investments and retirement planning,” Hann says.
“You'll set new financial goals and personal goals. It's a total reset of expectations – they're not necessarily lower expectations, just different.”
Epona Financial Guidance and Triple A Financial Services are corporate authorised representatives of Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.