When most couples decide to get divorced or separate, they are hopeful for an amicable resolution, including a fair, just, and reasonable division of their assets. Unfortunately, this is simply not always the case.
Especially when one person is being particularly vindictive by attempting to hide assets or fighting for more than their fair share. They don’t even seem to understand the irony that extending the process is actually costing them more.
In the end, it doesn’t matter if this is something your ex-partner might do or not as you should be protecting yourself and your financial assets anyway. To do that, here are the most common mistakes people make with their finances during separation.
Not knowing your financial situation
It’s certainly not uncommon for one person to manage the money in a relationship, But once you’ve made the decision to break up, it’s super important for you both to have a total and complete understanding of all aspects of your financial situation.
While it probably won’t be the first thing on your mind immediately after your split, that’s when you need to start getting copies of all your important financial documents regarding your incomes, assets, and debts. This usually means bank account balances, credit card statements, employment contracts, insurance forms, superannuation details, property titles, and more.
Insurance is something that typically gets overlooked during a divorce, but it’s important to ensure that any children involved are financially protected, even during or after a split. You’ll need to look into any necessary beneficiary changes such as a change in marital status, as well as accounting for the cash value in whole or universal life policies.
Making assumptions regarding asset values
It’s important to understand that the value of many non-cash assets can appreciate or depreciate. This means that splitting property equally based on current valuations doesn’t automatically mean that it will be a truly equal asset share over time.
It’s so important that you ensure any assets being divided during property settlement negotiations are comparable in asset value, especially in areas such as transaction costs, taxation amounts, and current market values. Remember too that the actual value of an asset might not be accurately defined by current markets, so you should also look at the anticipated long-term value.
Not writing a new Will & Testament
One of the other things you should be taking care of sooner rather than later is changing the beneficiaries of your will. The reason it is important to get this done fast is so you can be sure that your money doesn’t go somewhere you no longer want it to, just in case something terrible does happen to you before the end of the separation process.
Unfortunately, there have been some unlucky people who passed away before the settlement was completed and everything went to their ex. This is doubly important if you have children, or plan on remarrying soon, because otherwise, your ex-partner may get everything.
Not knowing how the asset pool works
The combined value of all your joint finances and properties before separation is called your asset pool. You need to be aware that your asset pool is valued at the time of settlement, not your separation date. This means any assets sold or liabilities gained between your separation and settlement are subject to division so they must always be disclosed.
That being said, you want to make sure your ex-partner isn’t able to diminish your asset pool’s total value in any way, whether by adding new debts, selling assets for lower values, or decreasing their value in any other way.
That’s why you should speak to a family layer as well as a financial advisor as soon as possible after your separation. If you’re unable to come to an agreement amicably regarding the asset pool of your property settlement, you’ll need to contact a dispute resolution service first before making an application to go through the courts.
Not taking care of joint debts
Unfortunately, there are no set rules when it comes to splitting joint debts after separation. If you can create a payment plan together for paying off joint loans and other debts, make sure you put everything in writing so you both have evidence.
If you’re unable to come to a suitable agreement together, you may want to discuss alternative repayment options for your joint debt with your financial provider or bank. They may have a feasible way for you both to stay on top of repayments because finding a way to end your joint debts together will only ever be a positive thing for you both and your finances.
While every situation will undoubtedly be different, most people certainly can’t afford their ex-partner to make their financial situation any worse. Legal advice from a divorce lawyer is highly recommended.