By Danielle Hart and Jane Koelmeyer

Untangling assets after a broken relationship can be daunting. However, approaching the situation fully informed, and supported with financial and legal advice, in good health and with open communication can make the process more manageable, less costly and help ensure that your interests are protected

Relationship breakdowns can be emotionally challenging, particularly at this time of year when holidays are fast approaching. As an accounting partner and a family law specialist, we’ve both seen when emotions can cloud judgment and make it difficult to approach asset protection, and if required, a division. The holiday season can make this harder, but it’s a sad fact that for many couples, this is the period when it’s finally time to let go and separate your lives and assets.

So here are some pointers on how to do just that, calmly and rationally through a separation process.

The Most Difficult Aspect: Letting Go

Shared possessions often carry memories—both good and bad—which can make it hard to lose, or even keep, certain items. People can make decisions which make no financial sense. The cost of settling some disputes is disproportionate to the value of the issue or asset, so advice about when to let go can save you angst and cost.

Important decisions have to be made at this time. Approaching this task with your accountant helps to ensure that the overall impact of your decisions is clear to you: they can help ‘light up’ options to deal with these issues and help you understand what each might mean for you.

The First Step

To begin the process, a comprehensive inventory of everything acquired during the relationship (including assets and debts) must be taken. This includes:

1. Physical Assets: Real estate, vehicles, furniture, and personal belongings.

2. Financial Assets: Bank accounts, investments, and superannuation accounts.

3. Intangible Assets: business interests.

This helps provide a clearer picture of the “asset pool” i.e. what needs to be kept or divided – and it’s a critical step. Some people are very clear on what assets they have; others aren’t. But couples have a legal duty to exchange financial information, so transparency during this process is crucial and mandatory. Hidden assets can lead to complications, delays, protracted disputes and cost orders against parties who fail to honour their duty – even if it is an oversight.

This is why it’s important to maintain thorough records of all individual and shared financial dealings including assets, income, expenses and debts. These can be vital in ensuring a fair division and may be relied on if disputes arise.

Involving your accountant here is also important. They can help you provide information quickly and effectively. They can clarify ownership where different structures are involved and may already have structure charts that identify your financial assets. A shared early understanding of your assets saves you time and cost.

And it’s critical to consider the difference between the market value of assets versus the emotional value. The costs involved in ‘winning’ assets with great emotional value can be considerable, so some perspective is important. Accountants can help clients to make this assessment.

Have a strategy around dividing assets

Sometimes, the traditional division of assets may not be practical, and people need to consider alternatives such as trading assets or cash settlements. This is where a financial strategy meeting with your advisors can be hugely valuable. They can provide advice about which assets you actually do need for your lifestyle and future financial needs, and recommend the most favourable pathway to minimise the impost of tax and other fees to your family and you.

Think through your legal position

When assets are involved, consulting a legal professional is necessary. Laws regarding asset division in Australia are applied with considerable discretion.

Understanding your rights after a relationship is crucial and you should get specialist advice early, so you know where you stand. Family law also looks at businesses, trusts and partnerships, as well as personal and other interests.

Couples and their families are unique and so you need to get advice about your particular circumstances. Further, the Commonwealth Parliament has just passed new laws for property settlement which are expected to be effective over the next six months.

A lawyer can help mitigate emotional stress by providing objective guidance before, during and at negotiations.

Consider mediation

Discussions about finances can be tricky if it’s already hard to talk. Trust your judgement. If you feel conversations might be become contentious or unproductive, consider involving a mediator sooner rather than later. This can help ensure everyone stays on track, respectful and heard. It’s important that everyone remembers the intention is to find a resolution through a respectful conversation that allows both parties to move on. An accredited mediator can provide structure and help both parties reach an amicable agreement.

Protect yourself in other ways

Family law property settlements often occur in an emotional context. It’s important to recognise that the parties to a separation are making big financial decisions in the midst of emotional upheaval. It’s essential to make fully informed decisions, rather than decisions based on emotion alone.

Feelings of anxiety, distress or just being overwhelmed are commonplace, but that does not make them easier to manage or safe to ignore. If you are feeling overwhelmed by the separation, then talk a health professional, like your doctor. It is difficult to make wise choices and decisions if you are unwell. Take care of your health at this time when you are making big decisions.

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Please do not hesitate to contact us should you have any questions.

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