Be informed and aware if divorce is looming – Australian Financial Review
PUBLISHED: 11 Oct 2014 02:40:00 | UPDATED: 11 Oct 2014 04:59:17PUBLISHED: 11 Oct 2014 PRINT EDITION: 11 Oct 2014
By: Bina Brown
Living under the same roof as someone you plan to divorce can’t be easy. But there are plenty of couples prepared to put up with a toxic environment in the belief that if they stay put they get to keep the family home.
Family law is by no means prescriptive and anything can happen in the cold light of a court or mediation room, but generally the family home is considered matrimonial property and no one loses their rights to it if they move out, says Mitchell Solicitors senior associate Cheryl-Maree Bentley.
The breakdown of a marriage or de facto relationship can bring about some strange and irrational behaviour but living with the enemy, so to speak, does not have to be part of it. Nor does stopping all communication, wasting assets, delaying any form of settlement or thinking you are being clever by using joint funds to pay mounting legal bills.
If a separating couple can agree as much as possible about any asset splits and matters related to the children, including cost and care, the better it may be in the long run. It can save the decision being taken away from you and reduce on potential legal fees.
“The court has considerable powers,” Bentley says. “If one party just sticks their head in the sand, it can end up being to everyone’s detriment.”
As far as the family home is concerned, it makes sense for the mother to stay in the home if there are children involved and they are staying with her. This is generally the norm in our society, although that is slowly changing, Bentley says.
“But if the partner won’t move and the atmosphere is electric and the children are picking up on a toxic environment then we often advise clients who want to stay in the home to pack up and leave. It won’t affect their entitlements to a property settlement and receiving the property if that’s the result of any agreement or court order.”
Indeed, it may be that the home needs to be sold to meet the asset split. Much more important in any potential split is for the two parties to keep the communication as open as possible and try to be co-operative until settlement is reached, Bentley says.
Clear the airways
Specialist family lawyer and collaborative practitioner Caroline Counsel says a couple wanting to shape their financial future from the start should consider alternate dispute resolution before seeking court orders. Unlike the court, which has to “chop, dice and slice” relationship assets without taking people’s underlying interests into account, a collaborative process focuses on solutions that are tailor-made and sustainable for individual families.
Counsel says a good collaborative team comprises two lawyers each representing a party, a family psychologist and two collaborative-trained financial planners, one for each side.
“This multidisciplinary approach can add enormous value in helping you and your ex make verifiable, sustainable, interest-based decisions with proper financial modelling so there are no surprises in a year or two,” she says. As difficult as it may be, planning ahead and moving quickly are essential when divorce proceedings begin, says Centric Wealth adviser Amanda Engenheiro. “Developing a strategy can streamline the process, helping to avoid a long, drawn-out undertaking,” she says.
“Divorce and property settlements can take time depending on the degree of collaboration and level of agreement between parties, but it is generally best for everyone if matters are finalised as swiftly as possible so that each party can move on, start a new path and minimise the costs involved in a settlement.”
Claire Naidu & Co principal lawyer Claire Naidu says no one should assume a 50:50 split in a property settlement, with every case turning on the facts.
“Even if you are amicable with your ex and want to do it yourselves, you should at least find out what you are entitled to. [A party] may say, ‘Let’s not involve lawyers,’ but you have no idea if they have gone and seen someone for some initial advice,” Naidu says. “You could lose out significantly financially by not spending money on at least an initial appointment with a solicitor to find out where you stand.”
BFG Financial managing director Suzanne Haddan warns separating couples to be realistic about their finances. If you are fighting to keep the family home, for example, you need to be clear on whether you can afford any repayments.
“If you haven’t sat down to see if you can afford the family home, then don’t fight for it,” she says.
With the division of assets done and dusted, the time comes to pick up the pieces and move on with what you have left.
“Essentially your assets may have halved, so it is important to take stock of what you do have,” Haddan says.
“Make a list of all your assets and liabilities and do a budget. People living on their own start with halving the costs but that is ridiculous. It costs the same to turn on a light whether there is one or two people in that room.”
Having established where you are at financially, it may be time to reset some short and long-term goals.
One of the first things people want to do with any settlement is buy a new home, but one of the hardest things can be getting back to home ownership, Haddan says. Most separated couples can expect lifestyle changes. “You might have dined out at good restaurants but you might not now,” she says.
Prescott Securities financial adviser Darren Wright says the financial shock of divorce is often underestimated, whether someone is left well catered for or facing a visit to Centrelink for the first time.
“Most people are creatures of habit and suddenly they have different levels of assets and debt and possibly income to contend with,” he says. “They often have half the assets but similar goals. It may be that they want to retire at the same age as when they were married or educate the kids in the same way but suddenly they have to reassess whether their goals are realistic.”
The financial challenge becomes even more difficult as people juggle not only what is happening immediately but where their new lives are headed. “Often there can be one person in a household who has been managing the finances, leaving the other to manage money for the first time,” he says.
Paperwork will be par for the course in any separation, with various documents needing to be checked and possibly revised.
Engenheiro says wills may need updating and powers of attorney changed.
“Insurance policies may need to be reviewed, including changing the beneficiaries. The nominated beneficiaries of any superannuation may also need updating or the money may end up going in the wrong hands,” she says.
Haddan says anyone oblivious to the family finances should get on top of them, particularly in the lead-up to a divorce.
“One of the best ways to know what is going on is to make sure you attend all the appointments with financial advisers and accountants and take an interest,” she says.
“Knowledge is power. The last thing you want post-divorce is a new discovery about the family finances. All through your relationship you need to keep track of the assets and liabilities of the family.”
Bentley says separating partners also need to be on top of financial matters relating to any family business. If a business is in trouble and owes debts, those are part of the matrimonial pool.
“Had the business been really profitable then both parties would have enjoyed the profits. Equally they may have to share in the losses,” she says.
“The court is not sympathetic to one person being ignorant of how a business may have been operating. You should have made it your business to find out.”
The Australian Financial Review
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