Here’s a handy primer for getting your financial situation on an even keel.
Disclaimer: This article is a general advisory only. Before making any major decisions based on the information provided, please seek advice from your dedicated Agar Fenwick Client Manager, or similarly qualified financial adviser.
Divorce and separation aren’t pleasant, but they happen. The NZ Herald reported that New Zealand ranks 25th in the word for divorces per capita, and that the number of divorces in 2020 was likely to eclipse the 8,391 seen in 2019.
Of course, the pressures of lockdown; an economic downturn and COVID restrictions will have played their part in this expected rise.
Ending a marriage or negotiating your way through a separation is stressful enough as it is, understandably causing emotion upheaval, even before you begin to start thinking of the financial implications.
If you’re currently recovering from a split, you’re probably looking for simple, practical steps you need to take to get back on track. We’ve got you covered.
Here are some of the key financial things to consider, if you’re freshly out of a relationship or handling separation.
Your relationship property
Generally, if you’ve been in a serious relationship for at least three years, most of your possessions will be seen legally as relationship property.
Things like your house, your car, and even your KiwiSaver returns during the period you were together, will be up for division. If you can’t come to an amicable agreement, or if there are factors that mean a 50/50 split isn’t equitable, you may want to get legal advice or mediation. Community Law has an overview of how this process works here.
If you have taken out credit cards and other debt with your partner, during the course of your relationship, you will probably want to clear it and start fresh with accounts in your own name.
It’s important to note that the responsibility of joint debt falls on both parties. Even if you are paying your half, if your ex-partner doesn’t pay theirs, it will negatively affect your credit rating and you may even be called on to pay the full amount.
Check whether you are a guarantor for any of your former partner’s obligations – these agreements can still be called on even if you are no longer together. Close bank accounts that you held as a couple, unless there are special circumstances whereby you need to jointly pay for ongoing expenses.
It’s wise to prioritise and check which jointly held bills are likely to continue in the short run.
This might include things such as the power bill for a jointly held property that is on the market. Ensure they are paid so that you do not end up with a black mark on your credit score, and try to ensure sure that you each take individual responsibility for the bills that you will take forward into your newly separated lives, such as your mobile phones or subscription services.
You may need to reassess your household budget to ensure that your spending still fits your income.
If your change in income is substantial, focus on keeping things affordable to avoid stress and further financial hardship, and accept the inevitability of ‘living within your means’. Trying to maintain the same lifestyle after a drastic change in circumstances cuts your household income can lead to more financial pain down the line
It’s common for married couples to own each other’s life insurance policies. Check how your insurance is structured and whether arrangements need to be made in light of your split or separation.
Of course, KiwiSaver can never be a joint account, but you may have planned for retirement together. If so, make sure you tweak your KiwiSaver to make it work toward your new goals now that your circumstances have changed. This may mean a higher contribution rate if you can afford it, to ensure your retirement savings don’t fall too far off track.
Check your benefit entitlements
Because things such as Working for Families are determined on a household income basis, you may find that you qualify for more Government assistance as a one-income household. Check that you’re getting all the support that you are entitled to.
A Will can swiftly become out of date following a split. It’s crucial to get a brand-new one setup, to prepare for the worst (while hoping for the best)! Get in touch with your lawyer to draft a new Will, particularly if you’d like to make sure that your children are taken care of should you no longer be around.
If you are based in the Kapiti or Horowhenua regions, Wakefields Lawyers offer a comprehensive Will service, inclusive of advice and guidance.
Need bespoke financial advice around your split? For more complex circumstances, such as situations where your ex-partner and yourself own investment property, or are shareholders in a jointly owned business, contact your Client Manager at Agar Fenwick in the first instance, for expert counsel regarding your options.
If you are not currently an Agar Fenwick client, and have a question or would like to register with us for award-winning accountancy and business advice, please get in touch via firstname.lastname@example.org or click here to fill in our contact form. We are here to help you assess your options.