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March 24, 2017
Financial Issues Facing Divorcing Couples (Part 2)

Many couples in strained relationships decide to stay together due to a variety reasons. This scenario can be especially true for those couples with children.

Respondents of a 2015 Relationships Australia survey who indicated financial problems as being more likely to keep couples together, 39 per cent thought it was because they couldn’t afford to break up.

Understandably, it is not an easy decision to make.

The couples that do file for divorce, end up confronting many emotional and financial challenges — a topic we covered previously in our Financial Issues Facing Divorcing Couples (Part 1) article.

Here are five more of the most common financial issues faced by divorcing couples.

1. Not Distinguishing Between Asset Worth and Asset Value

One of the most contentious assets couples fight over is the matrimonial home, oftentimes blinding both parties to the downsides typically attributed to and associated with home ownership.

Let’s assume you get to keep a house that’s paid off and worth $650,000. That may sound like a great deal, but the real value of the asset in monetary terms will be lessened by the costs of maintaining it.

Even without a mortgage, utility costs and council and water rates will all still be payable.

Although you would have an asset worth $650,000 how will you live? The asset will not generate income.

2. Believing Assets Can Be Owned Separately

This is typically where spouses become unstuck as many spouses incorrectly believe that any assets they’ve brought into a marriage are theirs and not jointly owned.

In property settlements, everything is on the table and any assets acquired during the marriage such as gifts between spouses are considered to be marital assets regardless of which spouse could be said to technically own it, or how it is titled.

3. Failing to Protect Your Business Interests

Under family law, the court is required to assess, identify and if need be make orders altering the interests of parties’ financial assets — including businesses — as it considers ‘just and equitable’.

And if like many Australians you are the owner or part owner of a business or businesses, your ownership interests may be exposed to claims from your former spouse or partner.

This could result in a knock-on effect leading to significant disruptions to day-to-day operations, loss of value of assets or cash flow, loss of control, a forced sale or even insolvency.

Not only will your interests be at risk, but if you have partners in the business not related to you and your spouse, they may get caught up in the proceedings.

4. Forgetting About Superannuation

Despite being one of the larger assets a couple will have likely accumulated over the course of a marriage, it is often overshadowed by the family home.

According to a recent study by Suncorp Insurance, only one in six divorcees take their ex-partner’s super into account in the divorce, making it the forgotten asset. And yet it is an asset which must be included in the pool, if you were married. In Western Australia defacto couples cannot split superannuation.

This may potentially offset the inherent disadvantages of the financially dependent party who will typically have less in superannuation due to having been out of the workforce for an extended period.

5. Being Ill-Prepared for Additional Expenses

Divorce proceedings and the legal fees involved are just two of the things separating spouses need to think about at such a delicate time.

Spouses must also give due consideration to other, important requirements such as separate accommodation, transport costs, food, phone, electricity, etc. This can add acute financial hardship on top of the emotional strain that is already acutely felt by both parties.

It is therefore wise to begin setting aside access to funds and credit for the purposes of hiring a qualified lawyer with experience in family law and easing the transition.

Hopefully this guide will have helped you to identify and navigate successfully some of the pitfalls that can be associated with divorce.

Contact Sue Holgate, LBH Partner by email on sholgate@lbandh.com.au for more information, advice and or representation.