How stay-at-home parents can financially navigate separation

Sep 6, 2023

What happens when someone who has spent a good part of their life dedicated to raising kids and making a home separates?

People in this position will generally be almost entirely reliant on their spouse for financial support.  So, when a separation occurs, not only are they losing a relationship; they are also potentially cutting off the hand that feeds them, and facing difficult financial circumstances.

There are things a stay-at-home parent can do to protect themselves from this situation, both before and after separation.

Before separation

Have individual bank accounts

Far too often, couples will only have joint accounts into which income is paid, bills are paid from and savings are accumulated.  While this is convenient in “couple-world”, in a separation, it can give an opportunity for the income-earning spouse to restrict the other’s access to funding.  Having individual transaction and savings accounts is a good starting point to minimise the risk of being “cut off”.   

Know your family financial position

It is common for one party to assume control of the family finances, where the other party has little to no interest in that aspect of their day to day lives.  However, not being actively involved and aware of the details of your family’s financial circumstances (including the location of assets/liabilities, main contacts, logins and passwords) can create a very difficult pathway to obtain and determine where/what assets are held and where funds are kept.

Making sure you have access to financial records (including historical records) is also extremely important and will make a financial separation much smoother.

Ensure assets are held in joint names

Having assets in joint names will ensure no action can be taken in relation to disposing of or dealing with assets without both parties’ consent.  Having assets in the sole name of the stay-at-home parent’s name is even better.

After separation

Ensure assets/funds are protected

Banks will very quickly lock down joint accounts where they are advised of a separation to prevent one party withdrawing significant amounts of joint funds.  Any accounts which hold any significant funds, such as savings accounts, offset and loan redraw accounts should be immediately restricted to require both parties’ authority to transact.  If the reliant party has no other access to funds, it is advisable to secure a reasonable amount of funds to ensure self-sufficiency, at least in the short-term and until financial matters are resolved.

It is common in family law matters for a party who is not the registered owner of a property to lodge a caveat to protect their interest.  This is in fact legally incorrect as a family law claim to a property does not create a caveatable interest. There can be unintended consequences for parties and the lawyers who lodge these caveats.  Specialised family law advice should be obtained as to how to lawfully protect assets which are potentially at risk of being dissipated.

Child support and children’s expenses

Generally, the sole income-earning spouse will continue paying children’s expenses after separation without issue, to minimise disruption to children.  However, this is not always the case.  There are two kinds of financial support for children:

  1. Periodic child support which is either an amount agreed or assessed by Services Australia taking into account a child’s care arrangements and both parties’ incomes. This is an amount paid weekly or monthly to the stay-at-home parent to assist with the general everyday costs of housing, feeding, clothing and educating children;
  2. Non-periodic child support are amounts either in addition to or as a replacement of the periodic child support. This usually covers out of pocket expenses such as private school fees, extracurricular activities, medical expenses and the like.  Non-periodic child support will only be paid by agreement or in some circumstances, ordered by a court.

Ongoing financial support

In addition to child support, a stay-at-home parent may be entitled to receive spousal maintenance from their former spouse.  An entitlement to spousal maintenance is assessed on a number of factors, including:

  1. The stay-at-home parent’s reasonable expenses. What is “reasonable” takes into account the standard of living before separation, but does not guarantee sustaining a luxurious lifestyle.  It is, however, more than just basic food and water;
  2. The stay-at-home parent’s capacity to earn income, taking into account work history, qualifications and responsibility for care of children (and their ages and stages). There is no entitlement to indefinitely remain a stay-at-home parent at the expense of their former spouse, and there is an expectation a stay-at-home parent will take steps to become financially self-sufficient, even if this involves some level of re-training;
  3. The income-earning spouse’s capacity to pay spousal maintenance, after taking into account their own reasonable expenses, child support and the like.

Securing accommodation

Deciding where parties will live following a separation is often one of the first steps. There can often be a battle about who remains in the family home.  A property registered solely in the name of one spouse does not automatically entitle that party to remain living there.  This is a common mistake.

It is important to ensure that before moving out, a stay-at-home parent secures financial support from the income-earning spouse to cover accommodation and living costs.  Financial support for accommodation will be considered a spousal maintenance payment.

Remaining amicable, cooperative and reasonable

Working together with your spouse to reach an agreement about interim financial support, children’s arrangements and a final property settlement, provided it is safe to do so, is obviously the ideal, and most cost-effective situation.  Often, pursuing financial support can cost a lot more than what a party ultimately gains, so it is important to be reasonable and realistic in the expectations.  Remember, one income previously financially supported one household now needs to be stretched to cover two.  This is generally going to result in lifestyle changes and a lowering of expectations.

Family dispute resolution with experienced and reputable practitioners will go a long way to less expensively assisting parties who simply need an independent, impartial person to assist with sorting out the financial arrangements in the wake of separation.

Understand your rights and entitlements

Seeking specialised family law advice early, and often before separation, is key to being able to strategically prepare for and manage the financial arrangements which arise as part of a separation.  It is very common for parties to seek legal advice well after things have turned sour and where the opportunity to take steps to be financially protected has passed.  This can mean escalated costs and conflict.