Breaking up is hard – this is what to do about your...

Breaking up is hard – this is what to do about your finances when divorce looms

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Just last month it was reported that Hollywood stars, Brad Pitt and Angelina Jolie have split. The couple’s combined wealth stands at an estimated $500m, much of it being tied up in their global property empire. As far as divorces go, this one is likely to be an expensive one.  Although the tabloid exploitation of such misery is disturbing there are lessons to be learned on how to best avoid similar scenarios.

In Australia, there were 121,197 marriages registered in 2014. In that same year, there were also 46,498 divorces, meaning almost 40% of our marriages end in divorce, according to data  from the Australian Bureau of Statistics.

There has also been an increase in the number of divorces for marriages that have exceeded 20 years or more. This statistic is troublesome as in such instances the assets to be divided are often greater and more complex in nature.

Of course, not every divorce results in conflict and disagreement over the division of assets. However, many separations that start out being amicable can spiral down into conflict and disagreement.

With this in mind, when the decision to separate is made, there are a number of very important steps that should be taken:

Draw up a list of assets and liabilities

It is important to be aware of the quantum of your combined assets and liabilities. If they are not readily known, you should endeavour to put together a list and seek assistance from your accountant if necessary. Having an idea about the value of assets that are available to sustain your future is essential; this will determine the manner in which you will go about seeking a financial settlement.

Get advice from a Family Court Lawyer

Divorce is hard and although it would be great for both parties to be able to sort it out amicably, this is rarely the case. Even if you and your ex don’t want the matter to become a legal stoush, it is still vital to seek advice from a Family Court Lawyer. They can advise you on your basic rights so that you don’t jeopardise your eventual settlement. Ignorance of the law is not something to be ashamed of.  However, getting it wrong because you were unaware of your rights and obligations is inexcusable and could be costly for your future happiness.

Consider placing caveats on property assets

If you believe that your former partner may endeavour to dispose of, transfer or borrow against any assets that would form part of the asset pool for settlement purposes you should have your lawyer have a caveat placed over the assets. The effect of the caveat is to warn any person or entity wishing to deal with the property that there is an interest claimed in the property by you. Any dealing with the property can then only occur after you have lifted the caveat.

Update your Will

In many cases the executor of your estate is a spouse and that spouse is also likely to be a significant beneficiary. We never know when our life will end and you may not want your ex to have access to your assets in the event of your untimely death.

Your superannuation binding death nomination

Your superannuation is not an asset that is included in your estate by operation of your Will. It is most likely that you will have executed a binding death benefit nomination which sees you nominating where your superannuation is to be directed in the event of your death. It is up to the trustees to determine who benefits from your fund membership balance, and the binding death nomination ensures that they place it where you wished it to go.

If you have not made a binding death benefit nomination you should do so as a matter of urgency. If you have made one you should review it and, if necessary, change it, so that your funds are not passed to your ex-partner.

Review your power of attorney and enduring power of guardianship

The persons to whom you have granted a power of attorney and enduring power of guardianship will usually include your partner. In the event of a divorce, it is worth determining who you grant power of attorney. Do you want the person able to make decisions on your behalf when you’re not able to be your ex partner?

Des Caulfield is the Director of MGI Adelaide, a global alliance of accountants and financial advisors. With more than 40 years experience in the accounting profession, Des has extensive knowledge and understanding of the issues faced by businesses across a diverse array of industries and sectors. He has a particular interest and expertise in the family and  privately owned business sector, consulting to a wide range of clients on issues such as taxation and estate planning, succession planning, family business constitutions, business sales and acquisitions.

Des Caulfield
Des Caulfield
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