Hugh Jackman and Deborra-Lee Furness have separated after 30 years of marriage, joining the ranks of other high-profile splits like Bill and Melinda Gates. Tom Cruise, on his third marriage, saw his longest one last 11 years.
This trend of long-married couples parting ways is becoming more common in Australian society. Despite increased life expectancies, fewer couples are reaching their 25th, 30th, or 35th wedding anniversaries.
As financial advisers, we collaborate with divorce lawyers and are witnessing a rise in “grey divorces” or the “empty nest scenario.” As children leave home, business demands grow, and couples near retirement, one partner often realizes they want a different life—be it through travel, a location change tree change or sea change, or focusing on personal or business goals.
Financially successful long-married couples face the challenge of dividing investments, superannuation, retirement savings, properties, and businesses. They must navigate a complex web of federal, state, and superannuation regulations.
Different Strategies for Different Clients
Untangling decades of financial arrangements is stressful, but it’s crucial to ensure both spouses can retire comfortably. Many of my clients in their 50s are divorcing after decades of marriage, and strategies vary greatly depending on individual circumstances. For instance, a woman in her late 50s who hasn’t worked in 30 years will need a different plan than a woman in her early 40s with recent employment history.
Older women negotiating financial settlements must ensure their money lasts a lifetime. Even if employed, there’s often a significant income disparity between spouses.
Dividing assets like shares, managed funds, bank accounts, and insurance policies is straightforward, but larger assets pose more challenges:
- The House: Often, the family home holds sentimental value and represents a lifetime of effort. Many wives seek to keep the home, not realizing they might fall into the "Asset Rich – Cash Poor" trap. Maintaining the house and meeting living costs can be challenging with limited liquid assets.
- The Superannuation Nest Egg: Superannuation accounts, often the second-largest asset after the house, are considered marital property if earned during the marriage. Dividing these accounts fairly is crucial for a non-working spouse's secure retirement.
Self Managed Superannuation Funds (SMSFs)
Many believe that a family SMSF is jointly owned, but annual statements and member reports reveal the true ownership. When a couple with an SMSF divorces, one member usually moves to another fund, involving complex reporting and tax implications. Accurate handling of these issues is essential to ensure fair tax distribution.
Family Law Provisions and Superannuation
The latest Family Law provisions allow couples to agree on how to divide superannuation at the time of marriage breakdown. However, actual splitting occurs only when a member's benefit is paid. The Superannuation Industry Supervision Regulations 1994 allows benefits to be split at divorce, creating separate interests for each spouse.
Dividing Superannuation Interests
- Superannuation Agreement: Couples can prepare an agreement and lodge it with the trustee.
- Court Order: If they can't agree, the court can order a split.
- Flagging Agreement: Prevents the trustee from paying out benefits without agreement on the split.
Family Business
Mid- to late-life divorce can cripple a business started during the marriage. Without careful planning, the business might need to be sold or take on excessive debt to pay out the former spouse. We recommend post-nuptial agreements to protect the business in case of divorce or death, especially for couples with children.increasingly being used in estate planning, particularly for people in second marriages.
Summary
Ensure lifetime expenses are covered when divorcing later in life.
Prioritize liquidity and flexibility when dividing assets, especially from an SMSF.
Carefully consider the financial burden before deciding to keep the family home.
Small business owners should plan ahead for divorce or the death of a business partner.
Engage professionals experienced in both Business and Family Law, including an Accountant, Financial Adviser, and Lawyer.
If you have any concerns about the topics discussed in this article, don’t hesitate to book a consultation. We’re here to guide and support you through this sensitive matter.
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