Relationship breakdowns can be extremely hard. Having to rebuild and recreate your life can seem overwhelming, sometimes a little bit impossible but it’s not.
Relationship breakdowns can take a toll on our emotional well-being. However, they also take a big hit to your financial well-being. A study done by Westpac showed that two-thirds of Australians who were considering separation were hesitant to separate due to the fear of having to start over financially.
In this blog, we discuss what you should take into consideration before merging your finances. It also discusses how to manage your finaces after a relationship breakdown and when the courts should get involved.
What to think about when combining finances
Financial stress in a relationship can often cause a breakup. Therefore, it’s really important that you deal with it, carefully and with consideration. In any new relationship, you cannot predict if it will last the distance or fizzle and fade quickly. Often relationships start with high emotion, great optimism and rose coloured glasses. The last thing many new couples want to discuss is their finances.
It’s important to have open and clear communication regarding finances. Sometimes couples simply aren’t compatible due to their attitude on saving vs spending. One party will often resent the other for their behaviour around money. It’s important to think about and discuss how shared expenses (like food and utilities) will be managed and how bigger purchases (like property) will be made.
It’s also important to ask yourself if you are prepared to financially support the other party if they are unemployed, have children, simply stop work or become unwell? These issues do arise and will affect future division of property and potentially trigger spousal support in the event of
relationship breakdown.
How to deal with Finances after Relationship Breakdown
At a starting point, you’ll need to know exactly what assets and liabilities there are and their worth. All property and resources of the parties is taken into consideration regardless of whose name it is in. Some property such as long service leave entitlements, have
special consideration.
Get good advice from an experienced collaborative lawyer about property division, spousal support and child support but don’t assume lawyers can guarantee an outcome. There is no obligation on the parties to only take into account what a lawyer says they are entitled to. They can also take into consideration their own values, judgements and priorities when negotiating. Discuss all dispute resolution options with your collaborative lawyer and try to start with the cheapest least invasive approach and only move to the next process option if that fails. Think of Court as an absolute last resort.
It’s also important to obtain financial advice in relation to future budgeting issues, investment and planning advice for your new life and also how much your borrowing capacity is – particularly if you are planning on buying the other party out of an asset, or need to secure finance to house yourself going forward. If you would like to learn more about what borrowing capacity is and how you can improve it, click here.
When is involving the courts appropriate?
Usually parties are better off trying to resolve their matter out of Court. Proceedings should only be issued if genuine attempts of direct negotiation, mediation, collaborative practice or lawyer negotiation fails. Court is costly, takes a long time and does untold damage to relationships. Court also does not come with guaranteed outcomes.
If parties can reach agreements they can obtain from the Court a Consent Order to give them security and certainty. We would always recommend this if property agreement is reached. This mitigates the risk in case one party changes their minds later and tries to come back for more after the deal.
Filling urgent applications is possible if there are genuine reasons to involve the court early. For example, a person with a serious gambling addiction needs to have orders made against them to protect assets, or If there is a desperate need to secure spousal support or protection of children from harm and if other avenues of resolution are inappropriate or fail.
The broad approach taken by the Court is not unfair in reality as it takes into account the contributions of each of the parties to the assets they now have, both financial and non-financial, direct and indirect. The Court would also take into account the future needs of the parties and the size of the asset pool, length of the relationship and personal factors like care of children and level of child support paid.
Final thoughts
It’s important to surround yourself with information, education, and people that are going to help you take positive steps forward. Managing finances after relationship breakdown can be extremely difficult but our team at Rise High can help you with these conversations. Bev and her team can support you further, to learn more about Belperio Clark, click here.
