When a relationship ends, finances are usually not a major priority. However, it is critical to safeguard yourself so that your pain is not exacerbated by financial difficulties.
Divorce and protection
In many circumstances, though not always, partners are aware that their relationship is nearing the end, and the question becomes ‘when’, not ‘if’, to call it quits.
The endeavour of unravelling a shared existence is not merely an emotional challenge; it can also yield significant financial repercussions.
The Australian Institute of Family Studies has determined that while women are more inclined to initiate divorce proceedings, they disproportionately experience financial hardship, particularly in scenarios where children are involved, a situation that arises in half of all divorces.
The primary role in raising children is usually played by mothers. Their career progression (and salary) is frequently halted as a result of this.
Because of this, contemplating therapy as a way to save the relationship may be worthwhile. Couples can find a safe, non-judgmental place to talk to organisations like Relationships Australia, which offer affordable services.
Dividing up your life together
If you realise the relationship has come to an end, it’s time to gently tackle the details of dividing everything you’ve built together as a couple. There are two points to keep in mind.
First, in a property settlement, all the assets that are owned together and separately will be gathered and shared.
Putting aside assets before you separate won’t stop them from being included in the property division.
On a similar note, going on a big spending spree with your ex’s credit card probably won’t lead to the best outcomes. The amount could simply be taken from your portion of a future property settlement.
Another thing to consider is that in Australia, we have ‘no fault’ divorce. It might be frustrating, but it doesn’t impact a property settlement if your ex has had multiple affairs while you’ve stayed faithful.
According to Ian Shann, the exception is when the relationship has been tarnished by family violence, which can influence how property is distributed.
In general, according to the Family Law Act, a property settlement will be established by a three-step process that considers:
- ‘Pot’ value (the ‘pot’ being assets less liabilities, or debts)
- The contributions made by each individual at the start and during the relationship, including non-monetary contributions like home improvements or child care and housework
- if any unique circumstances (such future requirements) ought to be taken into account while deciding on the financial division.
Shann mentions that if you don’t have a BFA and can’t agree on how to split your property, the Family Court will step in and make that call based on the points mentioned earlier.
There’s a good chance that you might walk away with a settlement that neither of you really likes. Also, the cost can be quite high.
“Shann points out that disputes in Family Court can drag on for years and might end up costing over $100,000 for each person involved.”
When a relationship falls apart, it’s best for everyone involved to sort out financial issues quickly, easily, and without spending too much.
“Get legal advice about how the law is likely to work, but then get matters resolved as amicably as possible by using an alternative dispute-resolution process like mediation. It will be quicker, less expensive and less confrontational, and allow you to move on with respect, which is really important if you are co-parenting.”
Shann adds that a family mediation can cost each party around $1500.
How your assets are valued
The big question for many couples going their separate ways is who gets what. Nowadays, it can definitely be a matter worth $1 million – and often even more! As we navigate through our wealth, it’s during this time that the real impact of divorce can become clear.
Although you need to be separated for 12 months to apply for a divorce, you can begin working on the property settlement right away! It’s definitely a good idea to keep moving forward with it!
The assets that need to be divided will usually be valued as of the date of your settlement (the family home might need a formal valuation).
The key takeaway is that everything each person owns by the time of settlement is officially available for consideration.
If you happen to win the lottery after separating, or receive a six-figure redundancy payout, that can all be included in the pool of assets to be shared. Dragging the chain not only makes it tougher to move on, but it can also lead to unexpected costs.
Cracking the super nest egg
Superannuation is one of the assets that will be split, but it will be handled differently than other assets.
Most of the time, that’s because super is held in trust and can’t be reached until the preservation age, which for people born on or after July 1, 1964, is 60 years old.
Once you know how much your total super savings are worth, you need to figure out how to split the money.
Couples can do a few different things about this:
- Split your super savings right then and there. You can write down how each person will get their share of the total savings, such as 50/50, 80/20, or any other share that works for both of you.
- Put off making a choice until later. In this case, a retirement account will be “flagged,” which means the manager is told not to take any money out of the fund until later.
- Don’t take a share of the super at all.
Splitting your super right away helps everyone move forward with their lives. But, if you haven’t met a condition of release – which usually means reaching preservation age – the money will stay in the super system. It looks like it won’t be possible to pay bills today.
Your future self will really appreciate it if you include super in a property settlement! This is particularly relevant if you have limited super of your own, which might happen if you’ve taken time off work to raise children or care for elderly family members.
Taking care of children
With kids being a part of almost half of all divorces, most couples will have to take care of their kids after they break up. There are no hard and fast rules in family law about which parent a child will live with. In this case, the court will look at what is “best for the child.”
It will save you a lot of time and money to work things out with your ex without going to court.
Ian Shann says that if you can’t, couples are required by law to try mediation or another form of alternative conflict resolution before they go to Family Court to fight.
“Mediation is a prerequisite to court proceedings because it has a high success rate, and this significantly reduces the number of cases that would otherwise end up in litigation,” explains Shann.
“Mediation helps about 80% of couples figure out who will care for their kids. “Only 20% make it to court.”
Navigating child support after a relationship breakdown
Similarly, both parents have a responsibility to financially support their children following separation. This applies no matter who the children live with. This support can take several forms, including:
- cash payments made direct to a parent
- non-cash items, such as paying health insurance or school fees or
- a combination of cash payments and non-cash items.
Child support often becomes a contentious topic for separating couples, as it may be perceived as a subtle form of ‘alimony’ or spousal maintenance, although it is not.
Shann observes, “It’s not unusual for a parent to desire that their children spend more time with them, believing this could lead to a reduction in the child support they are required to pay,” states Shann.
“They may want to reflect on the fact that having the kids with them for that additional time could likely incur higher costs than the savings gained from child support.”
Child support often requires negotiations from both parties involved. Parents unable to come to an agreement may seek a child support assessment through Services Australia. The formula employed is intricate; however, in general terms, the final outcome relies on:
- each parent’s income
- how much time each parent cares for the child
- the child’s age.
If you’re thinking about handling child support on your own, it’s a good idea to consider the long-term implications. Child support usually wraps up when a kid hits 18, but let’s be real—the expenses of raising children can go on for quite a while after that.
New Relationship and Blended Families
Even though the chances of a second marriage lasting aren’t the best, plenty of folks come out of a tough breakup ready to give love another shot.
Did you know that one in four marriages includes couples who have tied the knot before? Pretty interesting, right? A lot more people are going to start new de facto relationships.
Even though it feels like we can dive into new relationships forever, things definitely change when it’s the second or third time around. It’s not really about being more jaded or less starry-eyed. People usually have a lot more at stake, you know?
You know, the average age when people get divorced is around 47 for guys and 44 for gals. At this stage in life, couples usually have quite a bit of assets under their belt.
When it comes to separation, it often means splitting those assets right down the middle. When we’re about to start a new relationship, it’s totally natural to want to safeguard what we have left.
A great way to safeguard your remaining wealth is by using a binding financial agreement.
We mentioned before that this isn’t something you usually see with first-time couples. So, Elise Fordham is the principal lawyer at Australian.
According to Family Lawyers, repartnering couples are increasingly interested in BFAs.
“The overarching theme in the consultations with these clients is wanting to try to protect themselves from the stress of another unpleasant divorce, or wanting to protect their assets for their children,” she explains.
“We also see people later in life wanting a BFA and estate planning documents so they can ensure their accumulated wealth will be passed onto their children when they pass away.”
What to talk about this time
Fordham advises open and honest discussions regarding finances before re-partnering.
She suggests discussing your salaries, spending, money goals, and whether to separate or merge your finances. Discuss what will happen if one person loses their work or wants to retrain, and how to pay bills if you have a child.
Many people come to us after a divorce with wealth, either before or during the partnership. Fordham says they feel used by the other person wasting it by not working to their capabilities or creating multiple failed firms that spent wealth, and they must go through property settlement.
For those finding love later in life, a BFA makes sense, she says.
“You set out the terms of the division of your property and finances early on – either before you get into a de facto relationship, or before a marriage, or during a relationship.”
Setting up an inheritance
“There goes the inheritance” is a common thought among adult children who see their parents remarry. There may perhaps be some validity to this.
Taking care of children from a prior relationship is a difficulty in second and subsequent relationships.
There is potential danger in this location. It may not be sufficient for mixed families to have a current will.
Legal problems can arise from, and frequently do include, wills. We are not discussing the “lifestyles of the rich and famous” here. A survey conducted in Australia revealed that a significant majority of challenged estates have values below $1 million, with slightly more than half falling into the $500k+ range.
Luckily, answers do exist. According to Fordham, these include a “well thought-out estate plan, which would include a will and placing your assets in a testamentary trust” and a “business and financial agreement” (BFA) with your new spouse that specifies who gets what in the event of a couple’s separation.
Another option is to name your children as beneficiaries on a life insurance policy or in a formal death designation for your superannuation.
However, according to Lindzi Caputo, director of wealth management at HLB Mann Judd, dividing assets in blended families can be particularly tricky when both parents have children from past relationships.
“It’s important that each partner considers how they would like their share of the family wealth distributed – firstly if their partner survives them, and then also upon the passing of the surviving spouse,” Caputo adds.
That stuff can be complicated. “Think about the portion of the estate you’d wish to be distributed to children,” Caputo adds with an additional remark. Is it acceptable to you, for example, for each child to inherit the same percentage of the family’s wealth? As an alternative, how about dividing the assets between the partners’ biological children?
According to Fordham, “Your options are best discussed in unison with a specialist family lawyer and a specialist wills and estates lawyer to cover off all bases.” This is because every family is unique.
Ready to build a tailored financial roadmap? Don’t let one of these events dictate your 2026. Whether you are in the Macarthur region or the Hills District, our team is here to help you articulate your goals and implement a plan that works.
The information in this website and the links has been prepared for general information purposes only by our office and does not take into account your personal objectives, financial situation or needs. It is not intended to provide commercial, financial, investment, accounting, tax, personal or legal advice. You should, before you make any decision regarding any information, strategies, or products mentioned on this website, consult a professional financial advisor to consider whether it is suitable and appropriate for you and your personal needs and circumstances.
