Mixing Business with Emotion: Tips for a Smooth Financial Separation

Separating from a partner is one of the most emotionally stressful experiences someone can have in their lifetime. Along with the emotional impact, there are practical ramifications that need to be addressed and dealt with.

Whether you’re in a de-facto relationship or legally married, a separation does not void joint debt responsibilities. The longer you have been together, the more entwined your finances become.

Your most significant joint financial debt being your mortgage.

This, however, does not mean the process of dividing the responsibility can’t be a smooth one. With professional financial and legal advice, the process of financial separation can be an effective and smooth one if both parties work together.

1.    Get professional advice

The most important factor in financial separation is receiving the right support from financial advisers, mortgage brokers and lawyers. They will help you understand the state of your mortgage, what financial options you have and can help plan a budget until you sell or settle.

It’s also important to remember that you don’t need to bottle up your emotions during the separation period. Various counselling services can help you come to terms with the situation and allow you to think more clearly.
 

2. Do you need a solicitor?

When going through a financial separation, you need to ask yourself whether your relationship is amicable enough to negotiate and handle the financial separation between you. If not, you may need to hire a family law solicitor to negotiate and file the legal forms on your behalf. However, it’s helpful to note that the difference could save you thousands. 

If you assess your relationship to be in an awkward position and are unable to negotiate pragmatically, each party is encouraged to hire a solicitor. Depending on how large your asset base is, and depending on how civil the relationship is, you could be looking at costs that could range anywhere between $5,000 to $300,000. To lodge the forms yourself, you could be looking at a cost starting from $150.

3.    Agree on assets

During a financial separation, there are legal requirements that both parties must adhere to. Both parties must fully disclose their total net worth, including; income, savings, investments, property, pensions and more. It’s important to note that if you are unsure about the value of your assets, it is best to complete a professional third-party valuation instead of making a rough estimate. This will make the process of splitting assets much easier.

We understand the difficulty to make decisions when emotions are running high, and so in these situations, you may want to hire a family dispute resolution mediator to assess whether both parties are ready to negotiate on money matters and to help resolve disputes. Keep your communication lines open, no matter how hard it may be for you to interact with the other person.

4.    Divide Debts

Just as you settle on the division of your assets, you must split your debts evenly. These might include things like joint loans and credit cards. Even though you may be legally separated, both parties are still liable for an outstanding debt figure. Failing to pay debts off may harm the credit ratings of everyone involved.

During the separation, it is best to avoid taking on new debt. Don’t ignore bills and allow them to pile up. Address the small ones first and work up to paying off the larger.

5.    Think in the long-term

When in the process of separation it may be consuming to think of a short-term solution for cash. It’s important to remember not to lose sight of your long-term plan. While it may be easy to withdraw money from your savings account, it may leave you with a gap you may need, or have issues filling, in the future.

At Select, we offer no-obligation, quality and free advice to help you reach your financial goals. While financial separations can be extremely stressful, with the right advice, the process can be smooth and efficient. If you are in the process of a financial separation and are worried about the state of your mortgage, give us a call on (08) 9417 3399 to speak with one of our brokers.