The number of couples contemplating separation since the start of the Covid-19 pandemic is rising fast. In fact, an article in the Sydney Morning Herald reports a 300 per cent increase.
This includes couples with children who, understandably, are buckling under the stress of home-schooling, isolation, restrictions and financial uncertainty.
Yet, alongside this growing figure, the fallout from Covid-19 brings challenges that will severely impact the ability for couples to actually separate, now and into the future.
Understanding and being prepared for such challenges is key to navigating the separation process. In this article we outline the new-normal of financial separation amid (and in the wake of) Covid-19 and share valuable to tips save time and money.
THE FINANCIAL IMPACT OF COVID-19 ON SEPARATION
Valuation of assets
Couples who are commencing or part-way through their property settlement negotiations could face a set-back in the likely event that their assets change in value.
For example:
- If there is business in the asset pool which has been impacted by Covid-19 then it will be more difficult to agree on a valuation which is fair for both parties;
- Initial plans for sale of property and division of wealth may need to change if property has decreased in value due to Covid-19;
- Superannuation balances are less than expected, as the value of the assets in the super funds have reduced and withdrawals have been made as part of the Coronavirus Early Super Access
Not only does this place pressure on the separation process by having a smaller asset pool with which to find a financially workable agreement, but it also requires people’s expectations to change about what they will receive as part of the financial separation.
Collating information
The first step in a property settlement, is the gathering of information to accurately detail a couple’s net asset pool (being total assets less total liabilities).
This is expected to take longer with so many business interruptions. It could also be delayed by the above-mentioned requirement for re-evaluation in such a fast-changing economy.
Mortgage challenges
For many couples, finding a way forward financially will often include one party staying in the family home or both parties looking to purchase separate homes of their own. However, obtaining a mortgage as a single parent has become more difficult than ever.
In an article from S&P Global, Graham Cooke, a researcher at Australian mortgage comparison site Finder, states:
“Banks are likely to become more cautious in writing out new loans. The risky environment will lead to tougher conditions for borrowers. Lenders are likely to ask for more information and scrutinize expenses more closely. Indeed, some borrowers have already seen this happening.”
An issue made harder with the uncertainty of employment in many sectors.
Getting the timing right
Getting through a property settlement and coming out the other side to begin a new life is foremost in the mind of most separating couples.
This has changed as the uncertainty makes it difficult to know whether to complete their property settlement now or to wait until things settle down. Yet, with such an unpredictable future the question is: When will this happen and will they be better off, or not, if they choose to wait?
Ongoing expenses
A comprehensive financial settlement and child support agreement will finalise how assets, liabilities and ongoing expenses in relation to the children are to be split.
. Ongoing expenses to be addressed might include children’s school fees, extracurricular activities and other costs not ordinarily covered in a child support arrangement.
Committing to ongoing expenses is difficult and unadvisable in light of an uncertain financial future.
HOW COVID-19 HAS AFFECTED THE FAMILY COURT SYSTEM
Delays in court
With urgent applications to the family court surging by almost 40 per cent since the pandemic hit, an already congested family court system is now taking longer than ever.
Only the most urgent cases involving children or family abuse are getting through, with cases solely around financial settlements taking much longer.
Lawyers feeling the pressure
Family lawyers are also feeling the pressure as the current environment makes it more difficult for them to progress their client’s cases.
For those people using family lawyers it is critical that they keep an eye on what work their lawyers are doing in relation to their settlement in order to ensure they are actually resolving issues and not spinning their wheels at the client’s cost.
HOW TO FIND A WAY FORWARD
Despite these challenges it is possible to work through and finalise a property settlement. These tips will help you find middle-ground and a way forward as a new separated family.
Work together amicably
Now it is more important than ever for both parties to be as amicable as possible in order to reduce costs, stress and time of a financial settlement. Clear lines of communication, respect and understanding of each other’s, possibly changed, circumstances will assist the process immensely.
If a couple can be amicable during the separation process, it opens up the opportunity for much more cost and time efficient options to deal with the separation such as Divide – Simple Financial Separation.
Working with lawyers
For more complex matters involving children, abuse or if things are less than amicable, it is important to ensure both parties choose the right lawyers.
Choosing the right lawyer includes ensuring that they:
- Are trustworthy and will act in your best interests
- Have a transparent fee system and flexible payment solutions that suit your needs
- Practice in a pragmatic and cost-effective manner
- Align with your values
- Have a collaborative approach to resolution i.e. trying to resolve outside court
Seeing the bigger picture
The future is unpredictable and there will continue to be plenty of curve-balls for the next few years.
If couples work through their separation in a sensible manner it will leave them more time to deal with other challenges that may arise and need their full attention such as co-parenting successfully and raising happy children.
