If your relationship is over, you’ll likely be feeling sadness, overwhelm and uncertainty about the future. Handling money matters is probably the last thing you feel like doing while you’re dealing with the trauma. However it’s important that you don’t procrastinate protecting your finances after separation. If you do, you’re leaving yourself financially vulnerable and you could face complications down the track. Taking steps to protect your money now will also help you to feel more in control of your future and enable you to move forward faster. Here we take you through step by step what you need to do to protect your money and secure your financial future.
1. Get informed
Although separation is an emotionally charged time, facing your financial situation head-on is critical for your financial wellbeing. It will also make it much easier to move on with building your own life.
The first step to protecting your finances after separation is to get a clear understanding of your assets, liabilities and cashflow. Our financial position and budget calculators can help you do just that.
Living expenses are usually much less when you live together as a couple sharing the costs. After a separation your household budget can take a massive hit, especially if there are children involved. Paying the mortgage or rent by yourself can become challenging and you may need to make some tough decisions on your expenditure. It’s only when you have this information that you can begin to address important issues such as new living arrangements and managing expenses such as mortgages, rent and children’s education.
Being well-informed and honest with yourself also allows you to make any necessary changes to your income. Perhaps you may need to return to the workforce, increase the hours you are working or consider a side hustle as an additional income stream. Armed with accurate information, you are one step closer to a financially stable future.
2. Separate your money
It is a good idea to separate financially as soon as possible, even if you and your ex-partner are still on friendly terms.
Open up your own bank account and direct all your future income there, rather than to a joint account.
Contact your financial institution to notify them of your separation. Change any joint accounts to “both to sign” rather than “any to sign”. If possible, make it a priority to discuss with your ex-partner how to divide the money and close your joint accounts. Make sure these changes also include any loans you may have together. Otherwise your ex-partner could draw down on the loan without your consent.
Any finances that are not easily separated need to be closely monitored. It would be prudent to print off statements, take photos and keep a close watch on future transactions.
3. Update your insurance
Insurance is often overlooked amidst the upheaval of separation, but it’s crucial to revisit your policies, as they may include outdated authority settings and beneficiaries.
Begin with life insurance, where your former partner is likely named as the beneficiary. You’ll want to update this so that any payout is directed to other family members or a trust for your children.
In addition, review other types of insurance, including income protection, health, home and contents, and car insurance. If you’ve moved to a new residence or changed vehicle ownership, make sure these policies reflect your current circumstances. Updating them will help prevent future complications and ensure you remain financially protected.
4. Re-write your will and other legal documents
Estate planning documents, including your will, power of attorney, and superannuation nominations, should be updated to reflect your new circumstances after a separation.
It is likely that you nominated your partner to inherit everything you own in your will. Chances are you will want to make changes to ensure your assets go to other family members or to a trust for your children. Bear in mind that this not only applies to your will, but possibly to other family members’ wills if they have left things to you as a couple.
Similarly, it’s crucial to update beneficiary nominations for your superannuation, as these require a separate form.
It is also sensible to revoke any power of attorney that your partner has over you.
5. Restructure your business
If you and your ex-partner are involved in a family business or family trust, it’s essential to restructure your involvement to reflect the separation. Even if one partner has limited involvement in the business operations, they likely still have legal and operational control.
To prevent future complications, it’s important to revoke any directorships they hold and seek legal advice to adjust shareholdings, ensuring that control and ownership align with your new circumstances.
6. Secure your digital footprint
In a trusting relationship like a marriage, many people have no secrets regarding passwords and digital security. But after a separation, securing your digital footprint is as important as protecting your finances.
Take the time to change your passwords as a matter of priority, especially for accounts linked to finances or sensitive information. It’s also good practice not to use the same password for multiple institutions. There are loads of apps and tools available to help you manage this efficiently.
Be mindful that shared devices may allow your ex-partner access to accounts without knowing your new passwords, so it’s wise to take extra precautions to protect your digital privacy.
Further help
Divorce and separation can create enormous financial pressure at an already highly distressing time. Many divorced or separated couples are unprepared for the financial realities of single life and need help to get back on their feet.
A financial adviser can offer invaluable support during this transition by:
- Helping you manage your cash flow effectively to ensure you can cover your essential living expenses.
- Assisting in identifying new financial goals, helping you shift focus towards long-term financial independence.
- Developing a tailored investment strategy to build wealth and secure your future.
- Advising on appropriateinsurance to protect both you in case of unforeseen circumstances.
- Ensuring your wills and powers of attorney, are updated to reflect your current wishes and circumstances.
- Guiding you through the emotional aspects of financial decisions, helping you avoid costly mistakes during a turbulent time.
If you prefer to go down the DIY route, we have a Financial Planning for Divorce and Separation ebook that may help. This ebook provides an overview of common financial issues that arise through divorce and separation and how they can be managed.
The Australian Government has also produced a checklist for divorce and separation. While useful for covering the basics, it’s important to expand your focus to include more comprehensive financial matters such as insurance, estate planning, and any business interests you may have. Proper attention to these areas will help ensure a smoother transition to your new financial life.
Rebecca is passionate about promoting the positive impact of quality financial advice on personal wellbeing. Read her full bio here.
