The financial settlement orders have been approved, the solicitor’s job is done, right? Well, that’s when the accountants and financial planners need to spring to action.
The carefully laid-out steps in the Financial and Property Settlement Orders need to be attended to, and within the timeframes agreed in the document.
This may include resignation of one party from being director, secretary or shareholder of a company or the removal of a beneficiary or appointor of a discretionary trust, but there are plenty of further items to be considered.
The accountant needs to prepare the necessary documentation to record the above and arrange for both parties to sign the documents.
This may include “wet” signatures, as some documents require a physical signature to be lodged with ASIC (yes, even in 2024 this is still the case!). Trust distributions may need to be documented, and consideration must be given to when this occurs, as this will usually need to be documented and paid prior to the removal of a beneficiary.
Your clients will also need to consider what comes next in their financial future. This may include, but is not limited to: purchasing a new house, purchasing a car, how and where to invest the balance of any funds from the settlement, and what accounting and taxation structures they may need (or don’t need anymore).
From a financial point of view, there are several important items the clients need to consider moving forward:
Cashflow and budgeting
A newly divorced person often faces significant changes in their financial outlook due to a number of factors, the most obvious reason being a change in income and expenses. Often there will be a loss of dual income, and new expenses such as child support or legal fees. It’s a good time to review their budget, and as financial advisers we can help make it realistic.
What to do with cash or savings?
After figuring out their cashflow each year, your client will have a better idea of whether they have surplus income or if they need any of their cash payments to fund any ongoing or ad hoc expenses they may have following the settlement.
For example, do they need to buy new a house and/or a car, do they want to travel, or do they need to fund their children’s education? These are just some of the conversations we have with clients before figuring out what to do with any surplus cash balance available.
If clients do have surplus cash, we then consider options available to them – whether it be to put the surplus cash aside in a savings account, invest in different types of assets, or put it into superannuation for their retirement.
Regardless of these options, we also suggest clients set aside an emergency fund which equates to three months of their living expenses, which is worked out at the budgeting stage.
Superannuation
As part of the division of the asset pool, your client’s super balance may have been greatly impacted. We can help assess the implications of this on their retirement plans, and ensure your client has a strategy in place moving forward to maximise their super so they can retire comfortably. It is often an area that is neglected by clients as their main priority is getting used to living their new life as a single person.
Insurances and estate planning
We would encourage clients to do a review of their personal insurances to ensure the policies are still appropriate to their current situation. As separation or divorce is a major change, they need to look at the levels of cover to ensure that they are not over-insured, as quite often the previous insurance policies may have been put in place with their ex-spouse in mind.
Speaking of insurances, this segways into reviewing their beneficiary nominations in both their superannuation and life insurance policies, as well as their overall estate plan. Clients may want to ensure that their ex-spouse is not entitled to their wealth if they pass away, especially if new partners (and their kids) are added to the mix in future.
Where to from here?
The above points highlight why your duty of care for your client should not end post financial settlement. It took a lot of your hard work to get here – let’s ensure your client is working with an accountant and financial adviser who know the intricacies of separation and divorce, so your client can flourish in their new life!
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