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Who is liable for my ex racking up bills after separation?

A lot of people think that your asset & liability values are taken from the date of separation.  This is incorrect, they are taken as current at the time of mediation or court trial.

This can be a big shock if you have separated from your ex, but it has taken you months to get around to doing financial property settlement.

You may have been the saver in the relationship and your ex the spendthrift so you may be feeling sick to your stomach thinking you may have to give them hard earned money that you think they don’t deserve.

The family law act requires that you provide full and frank disclosure of your assets and liabilities to each other to agree on the financial settlement outcome.

There is no use in refusing to disclose your assets and liabilities as the court could subpoena the information if they feel there is an inequitable agreement been made.

You may feel like hiding some financial assets to gain an advantage in the settlement but if your ex-suspects then they may engage a forensic accountant to uncover the hidden assets. Conversely, if the financial settlement is done and property orders have been completed and it comes to light by your ex that you hid assets, the court could overturn your original orders and award a much larger financial allocation to your ex.  

It is a good idea to do financial settlement soon after the physical separation has taken place. To separate your financial connection will ensure that any future debt your spouse accumulates doesn’t become a burden to the family property pool. It also gives you peace of mind that any wealth accumulation you make is securely yours as your ex cannot come and stake a claim since financial settlement was completed.

You may be panicking thinking that you have saved money, paid off debt or bought new assets since physical separation. Disclosure doesn’t mean your ex is automatically entitled to any of it!

If there is a long period of time between physical and financial settlement, outline in your financial disclosure what the asset and debt values were at the time of physical separation versus current values. This not only shows the variable increases or decreases in value but can be a negotiating point in mediation on how the variance will be agreed to be settled. For example, you may have accumulated more savings post separation than your ex, but you may both agree that you will each retain any increased savings. There may be a larger credit card debt variance from the time of separation to the time of mediation. You may decide together that any personal debt for holidays, clothes, haircuts may be excluded from the debt balance, but any debt accrued for paying school fees, home repairs or annual home rates are to be valid debt that should be shared.

There may be properties that have increased in value since the physical separation and therefore a bigger asset pool to share. You may have even paid for renovations that have increased the capital value of the home that you may include in your balance sheet as an addback cost that has contributed to the increased value to be shared.

It is important to understand that the assets and debts of the family wealth pool continue to accrue post physical separation and therefore financial separation should be done as soon as possible thereafter. You do not have to wait until you are divorced after a 12mth separation period. There are deadlines to meet for financial settlement. If you are married, you have up to 12 months after divorce has completed. If you are de-facto, you have up to 2 years to complete financial settlement after physical separation.  Bear in mind that your current values will be used.

There are financial and non-financial contributions that are considered as factors in determining the financial property agreement. The longer the timeframe since financial contributions, such as a property brought in at the onset of the relationship the less valuable those contributions are over time. Future needs play a big part in determining the asset pool % split. So just imagine if you split up physically 12 months ago and your ex blew ALL their savings as they lost their job, but you continued to build your wealth, then your ex’s future needs to need more of the property pool may be considered requiring a greater allocation to them.  

Another consideration is changing your will as soon as financial settlement has completed so that your beneficiaries can change from your ex to your children or other family members. Your family could miss out on your wealth upon your death if your ex is still named as a beneficiary in your will.

In summary, embark on financial property settlement as soon as physical separation to uncouple your financial connection with your ex. This will not only enable you to start to create your own financial security but will also enable you to rebuild a new life unencumbered to your ex.

Author – Cheryl Duffy, Divorce & Conflict Coach, Family Dispute Resolution Practitioner, NMAS Mediator and Parenting Coordinator.

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