By David Baruffi, Financial Advisor
With Australians marrying later in life and staying married for longer, the median age of divorce has risen over the last 20 years. It now stands at 45.3 years for males and 42.7 years for females. Couples who remain together into their 50s experience a lower divorce rate than younger age groups, but even so this age group still represents around 30% of all permanent splits.
While divorce carries a heavy emotional burden at any age, the financial stakes for older divorcees can be greater, and the prospect of starting over more daunting than for younger people. The over 50s have often accumulated significant wealth. They tend to be focused on that final sprint to retirement, maximising super contributions before putting their feet up and commencing a superannuation pension. Retirement may also entail downsizing a home or a move to the coast or the bush. At all points along this path through later life, the financial consequences of divorce are substantial.
Given the major upheaval created by this event it’s critical to obtain professional financial advice right from the start. This will help to ensure the smooth separation of finances and a reduction in any unnecessary emotional pain. This doesn’t just apply to the end of formal marriages; the issues are largely the same when de facto relationships come to an end.
At the end of a marriage or long-term relationship some issues require immediate attention while others can be left until a bit later. Urgent items include:
- Resolving living arrangements and ensuring access to funds for daily expenses.
- Establishing individual bank accounts and giving new bank details to employers.
- Securing an adequate income and working out a budget.
- Changing life insurance and superannuation death benefit beneficiaries.
- Revising wills and powers of attorney.
- If dependent children are in the picture, their living arrangements and financial needs must be taken care of.
- If property is held in a partner’s name, legal action may be required to prevent it from being sold prior to a property settlement.
Once these pressing issues are addressed attention can be given to:
- Dealing with the family home – will it be retained, by whom and for how much?
- How will superannuation balances be split?
- How will the division of personal property be managed, taking into account both the financial and personal aspects of this difficult task?
- In the case of a family business, will the business relationship continue?
Conflict or cooperation
Many couples manage their divorces cooperatively. For others it is a time of rejection, blame and conflict. But, even if a divorce can’t be amicable, it can often be handled in a mutually respectful way. Minimising the involvement of lawyers will help to avoid substantial legal costs, preferably to the benefit of both parties.
The next chapter
Many late-life divorcees will re-partner and establish happy new relationships. The financial aspects of re-partnering are many and complex, and even with the best of intentions, poor decisions, or even a failure to act, can have major financial consequences. For others, remaining single will prove more attractive. Either way, when life slips into a new and stable pattern, it’s time once again to seek out expert advice. Contact us if you would like to review the financial aspects of your own situation.
David Baruffi is an authorised representative and credit representative of AMP Financial Planning. Blueprint Planning Pty Ltd (ABN 78 097 264 554), trading as Blueprint Wealth, is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited, Australian Financial Services Licensee and Australian Credit Licensee 232 706.
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
Marriages and Divorces, Australia, 2012 – Australian Bureau of Statistics: 3310.0 – Marriages and Divorces, Australia, 2015 Released 30/11/2016
McCrindle Research, Social Analysis – Marriages and Weddings in Australia February 13 2015 www.mccrindle.com.au
ASICs Moneysmart website: Life Events – Divorce or separation