Financial Disputes at Separation
Few separating couples are able to part ways without significant financial pain. Even if money has not previously been an issue, it can be difficult to take apart a complicated joint financial life. And it’s almost inevitably expensive to set up two separate households–particularly to the standard to which everyone is accustomed.
This Insight is about how to start thinking about affording life after separation but before property settlement. In this period, it’s really easy to over-commit and it’s really easy to get into a chronic state of argument about money. Planning ahead and controlled, supported discussion can avoid both of these outcomes.
Money in joint accounts
Either party is entitled to withdraw money in a joint account after separation for living expenses. If your name is on the account, the money is indisputably yours to use.
But if one of you takes a very large sum, or if it’s used for luxury items rather than for living expenses, you should expect that amount might be factored against you in the future property settlement. It might even bring on early legal action for urgent court orders.
Credit cards
In the absence of clear agreement on the issue—perhaps, say, in relation to expenses for children–it may not be a good idea for your partner to continue to have access to a credit account in your name. Best to talk to them about it before your cancel the card, though. Bringing on an unexpected card decline is like throwing a flame.
Buying things for the new place
The reasonable costs of setting up a second household are perfectly legitimate expenditure of any joint funds.
Who should pay the mortgage
If a property is mortgaged in both names, then both of you are legally liable for the ongoing payments. This means that if mortgage payments stop entirely, the bank can bring legal action against both of you. But most lending institutions will suspend repayments in circumstances of hardship, including because of relationship breakdown. If cashflow is going to be an issue for you after separation, you should make an early appointment to talk to your bank.
In practice, separating partners often agree that one of them will be responsible for paying the mortgage, or that they will each pay a certain proportion, until settlement is reached or the home is sold. Sometimes it’s the person earning the most who pays the most. Sometimes the couple agrees that the person remaining in the house will make the larger payment–as a form of rent.
It can be useful for the person who leaves to continue to contribute to the mortgage so as to be able to argue for a higher percentage of the capital gain on the property between the date of separation and the date of settlement.
On the other hand, you should be aware that if you move out and yet keep paying you are unlikely to receive full dollar credit for your post-separation mortgage payments in the calculation of the property settlement.
Who pays the bills (electricity, internet etc)?
If you have a lot of conflict with your former partner, it’s a good idea to get the essential services in your home under your exclusive control, even if you find this expensive. You do not want to have to rely on your former partner to continue to pay what are essentially now, your bills.
Under more amicable circumstances, it really depends on what you can agree. And what each of you can afford. Financial separation will mean that you will look after these payments yourself at some stage in the future. Whether you or your partner afford to do that right now is another question. Whether you and your former partner can agree to share each other’s expenses, even temporarily, is another thing again.
Spouse maintenance
The law says that one former partner must support the other if two conditions are satisfied: that the other is not able to support themselves adequately, and that the first partner is reasonably able to support the second. This is called ‘spouse maintenance’ under Australian law.
Generally, spouse maintenance is paid in the form of regular payment for a temporary period after separation. Or it might be paid in the form of payment of bills, for example. There is no prescribed form.
If payment of spouse maintenance can’t be privately agreed, and the two conditions are satisfied, the partner with less may be able to receive spouse maintenance orders from the family courts.
‘Freeze and starve’
Sometimes, either out of spite, revenge or maybe just as a tactic, one former partner decides not let the other have access to important assets (like a car or tools of trade) or to sources of income so that they can pay their living expenses and the expenses of the children.
As described above, the courts will not allow your partner to cut you off from vital income support after separation if you are unable to support yourself. If this has occurred, you can apply to the court for urgent spouse maintenance orders.
If you are being cut-off from access to assets that you desperately need, you can apply to the court for an urgent property injunction.
Power imbalance between the partners
Financial deprivation may also qualify under the definitions of family violence or even child abuse. A perpetrator of family violence may seek to punish a victim who has made the big decision to separate with unreasonable or harsh financial conditions. It is often the case, too, that a victim is prepared to put up with, or even agree to, unreasonable or non-existent financial arrangements.
If you feel that you might be in this category, or if you feel overwhelmed by the financial issues, or by pressure from your former partner, please seek external support from a community-based service, lawyer, mediator, financial adviser or counsellor.
How to approach financial disputes at separation
There may simply not be enough cashflow for you both to be able to do what you want to do in the period after separation. It is easy to get into a dispute over post-separation funding very, very quickly.
If this starts to happen, make an early appointment for mediation. The steadying influence of a third-party professional family dispute resolution practitioner can make a huge difference to your ability, jointly, to work out how to share what is available and what is reasonable for each of you to spend.
You will also be well on your way to working through towards a reasonable property settlement (though this should not be your No.1 priority at separation).
And if mediation fails then you still have the back-up option of applying to the court.
The bottom line
Dastardly, behind-the-scenes acts, and callous unfairness about money issues directly after separation can dig a trench of dispute and bitterness between you that ruins your mental health, damages children and removes all possibility of reasonable relations between you for years into the future. And might end up costing you a lot of money too. The basic message in all of these matters: Look to your own interests, and your children’s interests, while being upfront and reasonable. And if you don’t feel able to negotiate a fair outcome without support, please reach out for help.
Where to get help
Whether you intend to involve a lawyer in arranging your finances after separation or not, it can be really valuable to at least explore the issues with a lawyer as soon as you can after separation.
Tribe can help you get cost-effective clarity around financial issues at separation, providing legal advice, coaching in negotiation, or, if you’re unable to reach agreement, to apply to the court.
For help with issues around family violence and possible financial abuse, 1300RESPECT is a great place to start.
An independent accountant or financial adviser may also be very useful in helping you plan and budget.
Government-subsidised mediation services for financial issues are now widely available from Family Relationship Centres and other community-based service providers. Tribe has specific partnering arrangements with a number of outstanding and cost-effective private mediators as well. If you make a time for a free case evaluation, we’d be very happy to refer you.
Disclaimer
Every single person’s family law situation is unique, and the legal issues associated with that situation can be very serious. There is a lot of technicality in the family law around property and financial matters. The legal information contained in this Insight is for general guidance only. You should always seek professional advice on how it applies in your individual case.