Divorce - what happens to your finances
Changing Face of Marriage and Divorce
Marriage and divorce are changing in Australia. People are waiting longer to get married the average age of a female getting married is 28 and a male is 29 and 79% of couples getting married have lived together prior to marriage.
Average age of divorcees is also rising, it is now 45 for men and 42 for women. In 2014 there were approximately 46,500 divorces and this was down from around 48,000 the year before. These marriages lasted around 12 years on average.
What happens when someone gets divorced
Separation is not divorce. Divorce is the formal mechanism for ending a marriage, forms need to be lodged and a fee paid to the court to formalise it.
Many couples are separated but not formally divorced.
This should be done as soon as possible. There are time limits to abide by: Applications for a property settlement must be made within 12 months of the granting of a divorce or within 2 years of the breakdown of a defacto relationship. Note that for married couples it refers to the granting or divorce not separation. For defactos it’s the date of the breakdown in the relationship.
Same sex couples living together in a defacto relationship have all the same rights as a heterosexual defacto couple.
If you don’t apply within these time limits you will need to apply for special permission of the court but this isn’t always granted.
There is no set formula for dividing assets, it must be fair and based on the circumstances of each individual case. The split will be based on the assets and debts of the couple, how much each partner contributed to the union via wages, potential inheritances, contribution to child raising and homemaking. Future health issues are also taken into account. The age and cost of raising children is also considered.
Agree Amongst Yourselves
Last time we spoke about knowing your financial situation and in the case of a separation knowing where all your assets are, levels of income and debt and amount of money that it costs you to live a year will prove invaluable.
You don’t actually need to have solicitors and the court involved in the discussions about the split of assets and who is going to be looking after the children and many couples do come to an agreement between themselves.
However, even if you are both in agreement as to the split of assets and parenting roles you should seek independent legal advice to make sure all the issues have been covered off and that you have not been disadvantaged in some way.
If you do agree on a split for your property the court still needs to approve the split, hence the parties need to apply to the court for consent orders that make the agreement official.
What happens if you cant agree
You must make a genuine effort at dispute resolution prior to making an application to the court for financial or parenting orders.
Defacto property disputes can be dealt with by the court in the same manner as a married couple.
To get your settlement finalised all your financial dealings need to be included. This includes all the assets, family trusts, companies, superannuation etc.
Superannuation accounts and income streams can now be split as part of the settlement. So if one person has a large super balance, part of this can be transferred to the other partner. But the person receiving it still needs to meet a condition of release to access the funds. Eg retirement or be total and permanent disabled.
If property is transferred via a property settlement, no capital gains tax or stamp duty are payable on those transactions. However, if an asset is sold and then the cash split, capital gains tax would be payable.
Need to make sure the settlement works for you, look to get the right mix of assets and income. It may be the case that if you receive the family home but don’t have any income you’ll need to sell the home and buy something smaller to free up some money for living expenses.
Avoiding a messy settlement - Financial Agreements
With people marrying later in life, it is now more likely that people will bring assets to the relationship. To protect these assets people can set up a financial agreement, these are usually put in place before the relationship is formalised. This is becoming more popular. In fact the financial agreement can be set up at any time in the relationship.
Financial agreements – whilst these don’t sound like the most romance thing to do, it can say a lot time, money and stress down the track. Each person needs to get independent legal advice. The court can set this aside and make them invalid. Some of the reasons for this include: fraud, non disclosure and duress.
Wills and Enduring Powers of Attorney
A divorce or separation doesn’t invalidate a will. Interestingly, unless a will states otherwise, a marriage does make a will invalid! So if you have separated and it’s permanent you’ll need to make a new will and enduring power of attorney.
You should also review your death nominations in your superannuation accounts as well.
This advice is general in nature and doesn't take into account your personal circumstances. For advice that is specific to your circumstances please give us a call on (07) 3018 0587.