It’s an unfortunate fact of life.
Marriages and de-facto relationships are not averse to breaking down for various reasons, derailing life’s plans and causing conflict when it comes to sorting out the finer details of how it all ends – like who gets the dog, the house and all other possessions accumulated as a couple.
But this begs the question; does the end of a long-term relationship have to conclude badly when it comes to the division of family finances? And exactly who is entitled to what when all is said and done?
I asked family law expert Paul Ross, from Blackwood Family Lawyers, to share his professional knowledge and expertise on the subject.
The big questions
While the prospect of a separation and the messy legal battles that can come of it is not something most of us want to contemplate, it is a sad reality of our modern, fast paced lives that we have to accept.
So what happens when the unthinkable does occur?
“There tend to be two main areas that people worry about,” explains Paul. “The first one is what is going to happen with the care arrangements for any children they’ve got and the second, particularly in these times of economic uncertainty, is what’s going to happen financially?”
Concerns about losing it all, including the family home, and keeping their respective heads above water are generally the two biggest fears Paul is confronted with when he first meets couples in relationship crisis.
And it gets even messier when you contemplate the finer fiscal details of the family unit, like superannuation.[sam id=34 codes=’true’]
Although most of us would logically assume that our super fund is our super fund, the reality is your aggrieved spouse or partner has a good chance of walking out of the courtroom with a substantial chunk of your hard earned retirement nest egg.
“The courts now have the power to split superannuation, if the couple have been married for twenty years and living in what you might call a ‘traditional marriage’,” says Paul.
“The wife has perhaps taken a spell out of the paid workforce to raise children. During that time, the husband’s career is progressing and he’s earning more while she is of course getting no super whatsoever.
“So, what you often see after twenty years of marriage, is his super is worth a lot more than hers and very often the court will say; ‘Well, effectively this superannuation’s been accrued during the marriage so it’s only fair that we take some of his super and transfer it to her super account so that they have the same amount of combined super. We see this sort of superannuation splitting order more and more commonly these days,” he says.
Who gets the family home?
Generally speaking, there is a common perception in our society that the instigator of a family break up must forego half of all combined wealth – including assets such as the family home – to compensate the “aggrieved party”.
But is it really that simple when it comes to who is entitled to what?
According to Paul, it can be far more complex to walk away from a dysfunctional relationship than many people imagine, hence the old adage that the only people who every really win in a legal battle are the lawyers!
“In terms of splitting the family home, the question is the overall asset pool, which includes not only their family home but all other things – cars, shares and so on and what is the appropriate split?” explains Paul.
“There’s a misconception that it’s always fifty per cent, but of course it rarely works out to be half. We look at a whole range of factors, like who contributed what to the relationship. Obviously if somebody brought in a significant amount of assets or savings at the start and the other person didn’t then all things being equal, the person who brought more with them will get a greater percentage of whatever exists at the end of the relationship. We also look at inheritances that people might have received.”
Further considerations, says Paul, are things like whether or not there was any assistance from extended family such as parents or siblings, when the couple was scraping together a deposit for their Great Australian Dream.
“We also look at non-financial contributions – who reared children, cooked meals, did the washing? All that boring, but nonetheless essential stuff in any family unit, gets credit,” says Paul.
“And then we look at, now that the relationship is finished, what can each party earn? What is the ability of him or her to support themselves and any children they’re taking care of?
Even the person’s health is relevant.
If someone’s got a debilitating health issue that means their ability to work and earn money is reduced, that person would get an adjustment in their favour.”
Paul says the negotiation process for splitting the family asset pool generally comes down to mathematical fundamentals.
He says whether someone walks away with half, or a lot less, the outcome for both parties rests on the overall value of combined property (real estate and otherwise) and who can afford to keep it.
In other words, to ensure the fair division of wealth, “Assuming one person keeps X assets and the other keeps Y assets, one will have to pay the other a balancing amount.
To that end, given that for the vast majority of couples the house is their most significant asset, it comes down to whether either party can afford to keep it and pay the other out.”
These equations are straightforward on paper, but when you throw life’s curveballs into the mix – variants like one spouse supporting the family as the primary breadwinner while the other takes time off work to raise children, or role reversals due to the prolonged illness of a partner – things get trickier post-separation, forcing both parties to make significant and often spontaneous life changes.
That is where Intuitive Finance can assist.
We often advise people who find themselves in a relationship breakdown as to their options when it comes to retaining assets, like the family home or investments.
While it might seem challenging at first glance, we assess every situation individually and strive for the best possible solutions.
To that end, we will work with clients to determine how they can hang onto their wealth and manage to get on with life. Because every cloud needs a silver lining!