MABS MONEY BOX – Separation & your Finances: Accessing Financial Advice & Supports
Donegal Daily has teamed up with MABS, the State-funded Money Advice and Budgeting Service, to bring you a new monthly column which will offer advice and information on a range of money-related and budgeting topics.
In this third MABS Money Box column, Edel Mhic Amhlaidh (pictured below) will focus on dealing with your finances in the event of a relationship breakdown
Edel Mhic Amhlaidh is a Dedicated Mortgage Arrears Adviser (DMA) with North Connacht & Ulster MABS. DMAs provide a high level of independent, expert advice to people in difficulty with their mortgage arrears under the Abhaile Scheme
In MABS we find that one of the life events that impacts peoples’ finances the most, is when a relationship or marriage breaks down. Going from a two income to a one income household can lead to a dramatic and traumatic shift in personal circumstances and trying to access and get advice on entitlements, especially at the initial stage, can be a minefield. Many couples also have debts in joint names and may need assistance in contacting creditors and rearranging repayment plans. In this article I will outline financial matters couples should prioritise in the event of a break-up and signpost where separated people can access advice and assistance.
Taking pre-emptive measures
Often relationships start with high emotion, great optimism and rose coloured glasses and the last thing many new couples want to discuss is their finances.
It’s important to have open and clear communication regarding finances and to plan ahead in the event that a relationship doesn’t last. Having these conversations early on in a relationship can ensure that both parties have similar values and objectives when it comes to finances. Sometimes couples simply aren’t compatible regarding their attitude to saving vs spending and one party will often resent the other for their behaviour around money. It’s important to discuss how shared expenses, like food and utilities, will be managed and how bigger purchases, like property, will be made.
It’s also important to ask yourself if you are prepared to financially support the other party if they are unemployed, have children, simply stop work or become unwell. These issues do arise and will affect future division of property and potentially trigger spousal support in the event of relationship breakdown.
Planning ahead and taking some pre-emptive steps in a relationship can mitigate the financial implications of a separation.
These aren’t just for celebs or for those with substantial assets. While they may not seem very romantic, they are a very useful tool for anyone entering into a marriage to plan ahead and to manage expectations in the event of a break-up. Pre-nuptial agreements are not legally binding in Ireland and as such, if you find yourself before the courts in the event of a marriage breakdown, a judge is not bound by their terms. However they can serve as a useful guide for judges and may influence their decisions in relation to judicial separation and divorce orders.
What to do if your relationship breaks down
As a starting point, you should sit down and list all your assets (income, property etc.) and liabilities (debts) whether in joint or separate names. You’ll need to know exactly what assets and liabilities you have and know the worth of these. Broadly speaking, all property and resources of the parties is taken into consideration in the event of a separation regardless of whose name it is in. Both parties coming to a mutually agreeable arrangement between themselves regarding their finances is the ideal scenario. Explore mediation and other dispute resolution options and try and start with the cheapest, least invasive approach. While it is important to get independent legal advice, think of the Court process as a last resort.
It’s also important to obtain financial advice in relation to current and future budgeting issues, debt repayment plans and accessing financial supports. These are all matters that your local MABS office can assist you with.
Accessing financial supports & advice
The Citizen Information Service provides an invaluable information portal in relation to all aspects of a relationship breakdown and their website should be your first port of call when looking for information on financial assistance or make an appointment at your local Citizen’s Information office.
Immediate financial support can be sought from every local social welfare office – the website of the Department of Social Protection provides an online ‘office locator’ service. Although there are many dedicated payments available, eligibility for which will depend upon the particular circumstances of each application; the Supplementary Welfare Allowance payment includes capacity for the payment of an Exceptional Needs Payment and/or an Urgent Needs Payment. Both of these are discretionary based payments which can be applied for in urgent or emergency situation. More information is available here
FLAC (Free Legal Advice Centres) also offer information on applying for social welfare payments and making social welfare appeals as well as all other aspects of the separation process. Find your nearest Law Centre here
If dealing with a sudden loss of income as a result of a relationship breakdown, the key to managing your money is to take steps to adjust to your new income as soon as possible.
MABS suggest the following simple steps to try and keep on top of things:
- Make a budget and money management plan
Examine your income and outgoings
- Set your priorities
You’ll need to make sure you can pay the most important debts first
- Boost your income
By examining social welfare, tax and employment options
- Check your insurances
Ask your lender whether your mortgage, loan or credit card is covered by insurance
- Cut back your costs and spending
Examine ways of reducing your household bills
- Get debts under control
Do not put this on the long finger
- Contact MABS for help
MABS offers free, supportive, non-judgmental debt advice and you can be confident that our advice is always based on what’s best for you.
More information on all of these options is available on the MABS website
Income Tax Credits and Reliefs
When a married couple decide to separate and the separation is likely to be permanent, there are implications for the way in which they are taxed. It is important to understand the different taxation options available and how decisions about maintenance payments will affect taxation.
You should notify your Revenue office as soon as possible if you:
- dissolve your civil partnership
- have your marriage annulled
When you separate, divorce or dissolve your civil partnership, you can choose to be treated as married or in a civil partnership for tax purposes. In the case of a civil annulment, there is no choice of how to be treated for tax purposes. You and your former spouse or civil partner cannot choose to be taxed as a married couple or civil partners.
More information is available on the Revenue website
Spousal and Child Maintenance
Maintenance is financial support paid by a person for the benefit of their spouse/civil partner and/or dependent children. Spouses and civil partners are required to financially support each other. Parents are required to financially support their dependent children (up to 18 years old, or up to 23 years old if in full time education)
There is no legal requirement that unmarried persons in a relationship, or previously in one, support each other, even if they live or have lived together. Normally such persons can only apply for maintenance under the co-habitant relief legislation.
Maintenance arrangements can be made in a number of ways:
- By informal arrangement between the parties
- By a legal agreement between the parties e.g. a separation agreement
- By a Court as part of a decree of judicial separation or divorce.
- By a Court as a maintenance order. The District Court can award maintenance of up to €500 per week for a spouse and €150 a week for a child. The Circuit Court can award in excess of the amount however standalone maintenance suits in the Circuit Court are relatively uncommon. Note that when hearing an appeal from the District Court, the Circuit Court has the same jurisdiction as the District court.
- Unlike in some other jurisdictions, in Ireland there is no legal formula for calculating maintenance; it is up to the parties to agree the payment between themselves (if by agreement) or for the Court to decide what should be awarded. The Court will consider the income, earning capacity, property and other financial resources of both parties. It will also consider whether either party has other financial responsibilities such as a spouse or other dependent children.
- A court can vary a maintenance order on the application or either party.
Courts have power to enforce maintenance orders if they are not being complied with, by making an attachment of earnings order (which directs employers to deduct maintenance at source and pay it over to the person who should receive it) or according to the law of contempt of court ( if the maintenance order was made by the District Court).
More information is available on the Legal Aid Board’s website
How pensions are assessed during a separation or divorce
After the family or shared home, the most valuable asset which a separating couple/civil partners have is often a pension. Under legislation, a court now has the power to treat a pension as an asset of the separating couple/civil partners and order that it be divided into whatever shares it considers appropriate. Such an order is known as a pension adjustment order.
Pensions are particularly complex and specialist advice must always be sought in relation to the value of a pension.
The Pensions Authority is the statutory body responsible for regulating pension schemes and it provides information on how pensions may be affected by separation or divorce on its website
The above is provided for information purposes only. It does not purport to be either a statement of the law or legal advice.
For advice on any aspect of budgeting or spending, contact MABS – we are here to help
Call the MABS national Helpline on 0818 07 2000, Monday to Friday, 9am to 8pm. Money Advisers are available and waiting to assist.
MABS is funded and supported by the Citizens Information Board.