What to expect in a financial divorce settlement
By Belinda White, Founder, Fierce Girl Finance
Divorce is never easy. It’s a tricky mix of emotional, financial and practical challenges that seem to pile up on another. But for anyone facing divorce, knowledge is power. Understanding your rights and obligations is the key to protecting your own interests and working towards a fair financial settlement.
It’s important to remember that there are two separate steps to divorce: the annulment of the marriage and the financial settlement. These things can be done on separate timelines, so you may not need to wait until the ink is dry on the divorce certificate in order to start with financial settlement. With children involved, there are likely to be custody arrangements to sort as well, which have their own timeline. This post discusses the financial settlement part of divorce, and some of the issues to consider.
Family law is about facts not feelings
One of the challenges with divorce proceedings is that everyone in your social and family circle will have a view on what you deserve. They’ll offer lots of ‘helpful’ advice based on little more than what they’ve read in celebrity magazines or seen in an episode of Law and Order. They will tell you what they think you should go for, settle for, or expect, based mostly on how much they love you and dislike your ex.
However, family law is based on facts, not feelings. If you can afford to consult a lawyer, they will give you a more sober view of what you can expect in a settlement. Getting professional advice, as early as possible, is a very good idea. As the saying goes, forewarned is forearmed. If you are the one deciding to end the marriage, getting advice before leaving can help to ensure you do it in a way that protects your interests.
How assets are divided in a divorce – it’s not as simple as 50/50
I’ve written a series on my blog, Fierce Girl Finance, with input from Tessa Kelman, Senior Associate in the Family and Relationship Law Team at Lander & Rogers. One of the things that she points out is that there is no assumption of equality in Australian family law.
Instead, it’s based on considerations like contributions each person has made, and the future earning capacity of each one. It’s helpful to consult the official wording from the Family Court of Australia website, as it lays out those considerations.
The Family Law Act 1975 sets out the general principles the court considers when deciding financial disputes after the breakdown of a marriage … and are based on:
- working out what you’ve got and what you owe, that is your assets and debts and what they are worth
- looking at the direct financial contributions by each party to the marriage or de facto relationship such as wage and salary earnings
- looking at indirect financial contributions by each party such as gifts and inheritances from families
- looking at the non-financial contributions to the marriage or de facto relationship such as caring for children and homemaking, and future requirements – a court will take into account things like age, health, financial resources, care of children and ability to earn.
The way your assets and debts will be shared between you will depend on the individual circumstances of your family. Your settlement will probably be different from others you may have heard about.
I bolded the words in that last sentence because it’s so important. The famous line from Tolstoy says, “All happy families are alike, but unhappy families are unhappy in their own way”. If he were writing today, he might add, “divorce settlements make each party unhappy in their own way”.
In many instances, both people will feel like they didn’t receive the settlement they had in mind, because there is no cut-and-dried formula for the division. Of course, there are simple and amicable settlements too, and this is the ideal to aim for. However, it all depends on the individuals involved, the relationship they have and the property involved.
For anyone thinking about the financial settlement process, below are some tips:
- Get advice as early as possible – The more you know, the better decisions you can make about the separation process, and protect the assets you already have.
- Get a clear understanding of your finances – A key step is ‘financial disclosure’, which is essentially putting all your cards on the table for the negotiation. You will need to have a good handle on all of your assets, debts and expenses. It also involves a fair amount of paperwork, so be ready to allocate time to it.
- Be clear on your partner’s assets – Sometimes during a divorce, one party tries to hide money and assets from the other party with the aim of reducing pool of assets that will be divided as part of the settlement process. Do your due diligence to understand the full picture and get expert help you if you’re unsure or something seems suspicious.
- Have a team of supporters around you –Your loved ones may not understand family law, but they can provide the emotional support to help you keep going and provide a sounding board. They are just as important as a good lawyer.
- Accept that there is no ‘perfect’ solution – While lawyers can offer their advice, there is no magic formula for dividing assets. In the worst-case scenario, it would go to court and be decided by a judge. That is a costly and stressful process – try to avoid it by balancing what you think is fair and what you are willing to live with.
Ultimately, divorce is generally a stressful affair, and one that most of us would prefer to avoid. But with the right people around you, good advice and a fair dose of patience, you can make the process easier.
Belinda White, Founder, Fierce Girl Finance
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