Top 5 ways to reduce your financial risk when preparing for divorce
Preparing for a divorce involves considerable personal and financial risks. However, there are important ways to reduce your financial risk when preparing for a divorce. The following five tips from www.kwslegal.com.au can help ensure that you are protected financially, giving you confidence and peace of mind throughout the process.
- Gather your financial records
One of the primary goals of the divorce process is the equitable division of marital assets and debts, therefore it is important to develop a clear picture early of your financial standing. This involves a determination of what assets are marital assets, what assets are personal, what you both owe and what income you both individually receive. Having this information will save you time and money, but will also give your divorce lawyer a clear understanding of your financial position and ensure that they advocate for the equitable division of all available assets.
The asset pool in property settlement is wide and includes property such as;
- liabilities (mortgages, credit cards)
- financial resources
In order to reduce your financial risk when preparing for divorce, it is important to identify all assets available within the property settlement.
- Review and protect your personal financial standing in preparation for legal fees
The divorce process can sometimes take a considerable amount of time, and place financial strain on both parties. It is therefore important to review your personal financial standing, in order to ensure that you have sufficient money for day to day expenses as well as being able to afford legal fees. Taking these financial factors into consideration early, can help ensure that you are not left surprised and in debt following the conclusion of the divorce proceedings.
It is important to seek the advice of a solicitor in relation to;
- freezing any joint bank accounts if necessary
- updating rental agreements – if your name remains on the lease despite moving from the premises, you could be liable for unpaid rent or any damages caused by your former partner.
- separating property held in joint names
- taking legal action to prevent the sale of property by your former partner before the final property settlement.
- Remain up to date on mortgage payments, outstanding bills and financial obligations
It is important to keep careful track of your joint outstanding bills and obligations and keep clear financial records of your contribution to these payments, particularly during the period of separation. Even though you are in the process of separation and divorce, the creditors to whom you and your former partner are indebted, still have a right of recourse against you both. Therefore, if your name is on the mortgage and other outstanding financial obligations, it is important to keep these repayments up to date and documented so that they can be taken into consideration during property settlement.
- Superannuation, private health insurance and medicare
Superannuation is treated as a type of property in your financial settlement and can be divided by agreement or by court order. Therefore, if your former partner is the beneficiary of your super fund, this will need to be updated. If you have private health insurance in place, you need to consider who is the primary holder of the policy. If it is not you, your former partner can potentially remove you from the policy without notice, leaving you liable for expensive hospital and ambulance bills. It is therefore important to cooperate with your former partner if possible or contact your private health care fund to ensure that you are still covered and to inform them of the changing family situation.
- Consider spousal maintenance.
Spousal maintenance can be paid by agreement between the spouses or by order of the Court, and if necessary is an important means of reducing financial risk when preparing for divorce. Spousal maintenance is not automatic and will be based on a consideration of the needs of an applicant and the former partner’s capacity to pay. If you need to remain at home to care for children, or need time to find work or retrain, being aware of your likelihood of receiving spousal maintenance can help reduce the financial risk associated with divorce.