Financial Planning for a Divorce
Divorce isn’t always doom and gloom. In fact, we have many clients that are pleasantly surprised by how liberating separation from a former spouse can be.
It might push you to re-qualify in a different professional field, embark on a small business venture or buy the house that suits you and only you.
At the cusp of this new chapter, it is vital to review and update important details and documents that can impact upon your financial future.
Financial planning is one such way to start your new future and can involve a number of things to consider.
Divorce and Separation Financial Checklist
In Western Australia, a Will is automatically revoked upon divorce unless that Will specifically contemplates the marriage ending. The same does not apply for separation, as the marriage is legally still in existence until a divorce order is issued by the Family Court.
It is a good idea to seek legal advice and update your Will to reflect the changed circumstances. There will likely be necessary alterations to the beneficiaries of your Estate, the Executor/Executrix of your Estate, the property that may legally form part of your Estate and perhaps superannuation details.
Be mindful that divorce orders issued before 9 February 2008 do not revoke a Will due to changes in legislation.
Power of Attorney
When drawing up a General Power of Attorney or Enduring Power of Attorney, a partner is a popular choice of appointed attorney. Divorce does not affect the validity of a Power of Attorney. Therefore, the Power of Attorney will need to be formally revoked if you no longer want your former spouse to be your attorney.
Divorce can result in a changed superannuation landscape which will no doubt influence your financial planning. When reviewing your superannuation details, it is important to consider:
- Completing an updated binding nomination form for each of your superannuation accounts, ensuring any changes to the beneficiary of your superannuation is recorded; and
- Where superannuation is received as part of financial settlement and transferred into a new account, explore whether it would be beneficial to consolidate your multiple superannuation accounts.
A spouse is often the nominated beneficiary of a life insurance policy. Again, be sure to update the beneficiary details of your policy if necessary.
Your income and financial position can change considerably after divorce and a policy that was once appropriate may no longer provide sufficient cover. In light of your changed circumstances, it is a good idea to seek advice on whether to amend your existing life insurance policy, switch policies or cancel altogether.
Making big financial decisions
Depending on the drafting of your orders, financial planning and settlement can take some time to complete. It is a good idea to hold off on making any major financial decisions until your anticipated financial position after settlement actually becomes reality.
Even when all involved have the best intentions, things might not go as planned. The last thing you want is to accidentally overextend yourself because there was an unforeseen hiccup in how you thought the financial settlement would play out.
For example, you and your former spouse might have a signed contract for the sale of the family house, but the sale proceeds won’t hit your bank account until the settlement of the sale of the property.
If for whatever reason, the sale falls through before settlement, you don’t want to have committed your share of those anticipated sale proceeds to the purchase of another property.
If you would like to know how this applies to your situation, please call us now on (08) 6381 0208 or fill out this form to schedule your first 30-min free telephone appointment. Loukas Law are the leading family lawyers who clients can trust to help them build a future they can live with.