Financial planning is all about creating a road map towards financial independence, and while divorce or separation is a very emotional and turbulent time in a person’s life, a financial adviser, coupled with the right professional team, can help guide you through making the right financial decisions based on your situation and lifestyle.
One of the most difficult parts of getting divorced is determining how your assets will ultimately be managed moving forward. Once you and your partner have divided your assets with your respective solicitors, there are still a number of variables that need to be accounted for:
A financial adviser is there to help you understand the implications that your change in circumstances might have in the immediate and long term. We understand that as your world changes it would also bring a level uncertainty which is why it is good to have someone in your corner that can take that burden away.
Some immediate areas that would need your focus are:
It is important to focus on the future you want for yourself (and potentially your children). Establishing what you want to achieve in the short, medium and long term can help your financial adviser map out a plan that is tailored to your specific needs and requirements. It doesn’t have to be an elaborate journal, it simply needs to be a few, focused points under each time frame where you and your adviser can work together to create the future you want.
Now you have your goals on paper, it’s important to adjust your budget based on the updated levels and sources income you receive (this may be employment, maintenance or child support) and work out your expenses. Throughout financial settlement, it is particularly important to have timely access to liquidity (i.e. cash). This is something you can work through with your legal team and your financial adviser.
Once settlement is granted, you will have a good understanding of what assets are yours. The next step would be to ensure they are protected. It is important you ensure all your assets (houses, cars) but also remembering your largest asset; your life and income. Life insurance, TPD and income protection is most important when you are protecting yourself and your dependents. It is also important to ensure the beneficiaries of these policies are also correctly reflecting your wishes.
Another very important consideration during the divorce is tax. While tax may not be payable if assets are simply divided and not liquidated, tax is an important implication to consider as particular assets may have a significant tax liability in the future when you decide to sell. For example, an investment property that you and your ex-partner purchased 10 years ago could carry future tax consequences. While you may retain this, in the future if you decide to sell you could be liable to capital gains tax. This could also relate to the family home (or principal place of residence). As the PPR is a CGT (capital gains tax) exempt asset, there would not be any tax implications should it be sold. The potential tax ramifications (if any) need to be equal and fair and should be considered at the time of the separation process.
Work with an estate planning solicitor to prepare a new Will and Power of Attorney and guardianships arrangements if you have children. While some of these arrangements can’t be executed before your divorce is finalised, it is important to be ready to execute changes as soon as practical.
Like many challenges and adventures thrown our way during our lifetime, some journeys can be very difficult to navigate alone. Having your own professional team every step of the way would give you the greatest opportunity to reach your destination in the best possible fashion.
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email firstname.lastname@example.org or visit www.hewison.com.au
Please note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.