Super & divorce (and other tips to rebuild your finances)

A third of marriages end in divorce*. Relationship breakdown is an emotionally difficult time, that can have a significant financial impact as well, This impact can continue well into later life.  For example, households with men and women aged 55–64 years who haven't divorced earn around $10,000 a year more than those households headed by divorcees**of the same age.

But you can take steps to ensure that the end of your relationship does not mean the end of your finances. 

This blog deals with the complexity of splitting up one of your biggest assets – your super.
Before we get to that though, there are a few important things you should do to get your financial house in order.

1. Take a good look at your financial position.  
The first step is to gather all the information about your financial assets and debts. Getting hold of bank account statements, super balances, bills, financial commitments and other legal documents can give you a clear picture of your financial situation.

2. Get financial help 
For most people, a relationship breakdown is extremely stressful. The thought of making important decisions can be overwhelming. A trusted adviser can provide you with knowledge and guidance to help you feel more confident about the decisions you make.

They can also;

• talk to you about what to expect once an agreement on splitting your assets has been reached
• help you to clarify your future goals and aspirations
• work with you to make those plans a reality
• guide you on cash flow, insurance, debt, your home, investment, super and estate planning.

Seeking financial advice early in the process can be a smart move.

3. Get legal help
In my experience, finding a good family lawyer is really important for your sanity, your family's well-being and your wallet.  A good family lawyer will do much more than just provide advice about your legal rights, entitlements and obligations or facilitating a property settlement.

They’ll leave you feeling you’ve obtained the best result in the circumstances and feel positive about your future after separation.

What happens to super?
While the Law says Super is to be treated like any other property, it can be a forgotten asset when it comes to property settlements. Often this is because one partner is not aware of the value of the other’s super, or they’re young and don’t realise its value as they are unable to access it. But super will grow to be one of a couple’s biggest assets, so it’s important to factor it into any agreement.
​
Like other assets such as the family home, valuables and investments, many couples choose to split their super during the process of separation or divorce. Under family law, when a marriage or de facto relationship breaks down, super can be split under a superannuation agreement reached by the two people involved, or if an agreement can’t be made, you can have the court determine the settlement. You should get legal advice before deciding what to do. A lawyer can help you understand your rights and responsibilities, and explain how the law applies to your case. A lawyer can help you reach an agreement with your former partner without going to court. You may also choose to use a mediator to help you negotiate with your partner.

Seek the super or the house?
A common question is: “Should I go for the house or the super?”. To make this decision you really need to have a vision of your life after the settlement. Ability to access funds, tax implications, your expenses and your living situation are all key factors in this decision. Determining your new financial goals and strategies will enable you to make smart financial decisions through the divorce process.

Your super
Your partner has the right to request information about your super from your super fund, and when an agreement is made to split your super, your partner will be asked where their part of your super should be paid.

Your partner’s super
You can request information about your partner’s super from their fund. If your partner’s super is split, when the super becomes available you will have the following choices: 
Add the money to your existing (or a new) fund.
Take the super as cash if you are eligible for a cash payment. (Generally you can’t take super as cash unless you’re at retirement age or if you have super money which is ‘unrestricted non-preserved’).

What’s fair?
There are guidelines for dividing up property in the settlement process.  After everything is valued, your contribution to the relationship (not only financial contribution) and future needs are determined. Amongst other things, some of the things considered are the income and assets each partner has brought to the relationship during your time together, how much each of you have worked both inside and outside the home, as well as where any dependent children will live after the split. When coming to an agreement about super, some possible approaches include:

• One partner may get part of their settlement in the form of their ex-partner’s super.
• One partner may receive more super now and less of the other assets like the family home.
• Where one partner has super and the other has little or none, the super may be split 50/50 along with the other assets.

​A lawyer or mediator can advise you on the options for splitting super.

Case Study
Mike and Mary separated a year ago. After two decades and two children together, it took a few months of talking to work out how to divide their property and assets. Under their agreement, Mary kept the family home and stayed the main carer for the children. Mike received half of Mary's super and transferred the money to his super account. He works full-time and the children stay with him five days a fortnight. Mike’s cost of living goes up because he has to cover his own day-to-day living expenses, as well as contributing to the costs of raising the children. For Mary, life is a challenge as she returns to work full-time to pay the mortgage, as well as caring for the children. After getting financial advice, they both follow a detailed budget to deal with different income and expenses.  Mary contributes extra to her super to catch up for the super split.

The future
To successfully rebuild your financial life after divorce, you have to get back to basics – manage your cash flow, follow a plan, rebuild investments, manage the risks along the way. 

If you choose to work with a financial planner, your relationship together will be the most successful if you are willing to share everything – your fears, your goals, your dreams and aspirations. So choose someone you are comfortable with. The right adviser will also have no conflicts of interest, read why that is important here.

​*  ABS Divorces Australia, 2011
** Wellbeing of older Australians, Australian Institute of Family Studies, 2010

Disclaimer
This article and opinion is based on generally available information and is not intended to provide you with specific financial advice or take into account your objectives, financial situation or needs. You should consider obtaining financial, tax, accounting or legal advice on whether this information is suitable for your circumstances. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. See full Terms and Conditions here.