Keep the Financial Turmoil out of Divorce!
Current trends suggest that one in three marriages will end in divorce, leaving many people facing complicated emotional and financial issues. And the need to start again isn’t confined to married people, but applies equally to people in de facto and long term relationships.
Walking another path
Taking the first financial steps in a new direction isn’t as simple as finding a new place to buy or rent. There is also the need to review joint investments, accounts, superannuation funds, personal and health insurance, and possibly tax arrangements. Former partners can agree on a property settlement prior to or even without Family Court proceedings, underlining the importance of early access to sound financial advice. Obviously, the more a separating couple can agree between themselves, the more costs can be contained. Legal advice in any separation or divorce may be essential and can be invaluable, especially if it assists the parties to resolve important issues and avoid expensive legal contests. Of course, where there are children in the family, child maintenance may need to be sorted through in the early days too. In some circumstances, it may entitle one or both partners to temporary or long-term Centrelink parenting benefits.
Keeping a balance
It is recognised that the financial impact of divorce differs between men and women. Figures show that while a man’s living standards tend to decline, for a woman it is disposable income which tends to fall sharply. While the woman may have less income, in the early days of divorce she might appear to be more asset-rich than her former partner. This is because women tend to retain the family home if they have assumed responsibility for children. However, this disguises the fact that, overall, women are also less likely to accumulate wealth after divorce.
Behind the facts and figures are the human stories, and often they are stories of people who have met these challenges and then forged a new path, especially with support from experienced professionals. While all these issues can cause some anxiety, talking with a financial adviser can alleviate many of your financial concerns. You can work out a plan together to tackle issues like these, and create a clear path for the future.
Saving for a lifetime
Superannuation is an area which may bring some surprises. Since late 2002, the entire balance of a super fund has been treated as property which can be divided, a decision with far-reaching consequences. Generally it is the partner with a higher income who shares assets within their super fund. And any changes in super should then trigger a review of linked insurance cover. Lump sum payments, too, need to be handled carefully, as Centrelink asset and income test thresholds should be considered.
All these situations are manageable, especially with teamwork. By talking with a financial adviser you know that they are used to working with legal and other professionals such as accountants, to make sure everything is done correctly and unintended results are avoided down the track. While separating from an established relationship is challenging and often confronting, it is also an important time to take professional advice and to plan for a new future so that you can emerge and continue your journey on a sound financial footing.
This editorial provides general information only. Before making any investment decisions, we recommend you consult a financial planner to take into account your particular investment objectives, financial situation and individual needs. Southern Financial Strategies and its Authorised Representatives do not accept any liability for any errors or omissions of information.
By Steve Salvia
Steve is the CEO of Southern Financial Strategies, Accounting Focus and 10X The Business X Factor Perth Central East. A Plumber & Gas Fitter by trade and experience in the Mining & Construction industries, Steve has been a Financial Planner since 1994. He has completed his Advanced Diploma of Financial Services (Adv Dip FS(FP)), was honoured as ‘WINNER’ of the prestigious AFA Financial Adviser of the Year Award 2010 (Finalist 2009)(National Award), recognised as ‘WINNER’ AXA WA State Adviser of the Year 2010.