by Walid Joseph Kalouche
Divorce can be one of the most challenging times in a person’s life, both emotionally and financially. One of the key concerns for individuals going through a separation is the protection of their assets. In Australia, the Family Law Act 1975 governs the division of property and assets, ensuring a fair and equitable distribution. However, there are proactive steps you can take to safeguard your assets during this process.
This article will guide you through some essential strategies to protect your assets during a divorce
Understanding the Asset Division Process
Before diving into specific strategies, it’s crucial to understand how asset division works in Australia. The Family Court considers several factors when determining the division of assets, including the length of the marriage, the financial and non-financial contributions of each party, future needs, and the overall fairness of the distribution.
The process generally involves four steps:
- Identifying and Valuing the Assets: This includes all properties, superannuation, investments, and liabilities.
- Assessing Contributions: Evaluating both financial (e.g., income, inheritances) and non-financial contributions (e.g., homemaking, childcare).
- Considering Future Needs: Factoring in aspects like age, health, earning capacity, and responsibilities for children.
- Achieving a Fair Distribution: Ensuring the division is just and equitable for both parties.
Strategies to Protect Your Assets
1. Keep Detailed Financial Records
Maintaining comprehensive records of all financial transactions, assets, and liabilities is vital. This documentation will provide a clear picture of your financial situation, making it easier to establish your contributions during the marriage. Ensure you keep records of bank statements, property deeds, investment accounts, and any other relevant financial documents.
If you can manage to keep records for the other party, do that as well. Records of waste by them or financial recklessness is also factored in.
2. Consider a Binding Financial Agreement
A Binding Financial Agreement (BFA) can be made before, during, or after a marriage. This agreement outlines how assets will be divided if the marriage ends. Having a BFA in place can provide certainty and reduce the potential for disputes. It’s important to seek independent legal advice to ensure the agreement is fair and legally binding.
3. Separate Your Finances
As soon as divorce is on the horizon, consider separating your finances. Open individual bank accounts and redirect your income into these accounts. This action helps in clearly delineating your financial status post-separation and prevents the other party from accessing your funds without your consent.
4. Protect Your Superannuation
Superannuation is often one of the largest assets in a marriage. Ensure you are aware of the superannuation entitlements and consider how they will be divided. You might want to consult a financial advisor to explore options such as superannuation splitting orders, which can provide a clear division of superannuation assets.
Have any Self Managed Super Fund audited by an expert accountant. It so happens that some parties use the Self Managed Super Fund as a slush fund to do anything they please. This is very costly.
5. Be Cautious with Joint Accounts and Loans
Joint accounts and loans can complicate the asset division process. Pay off joint debts as soon as possible and close joint accounts to avoid further financial entanglement. This action helps prevent your spouse from accumulating debt in your name, which could affect your credit rating.
I would also suggest stopping any Joint Credit Card accounts or cancel the secondary card holder.
The aim is to stop the other party from incurring debts in your name.
5. Evaluate the Family Home
The family home is often a significant point of contention in divorce proceedings. If you wish to retain the home, consider your ability to afford mortgage repayments and maintenance costs. Speak to your bank or a finance broker.
Alternatively, selling the home and dividing the proceeds might be a more practical solution, allowing both parties to make a fresh start.
6. Seek Professional Advice
Engage a family lawyer early in the process to understand your rights and obligations. A lawyer can help you navigate the complexities of asset division and provide strategies tailored to your specific circumstances. Additionally, consulting with a financial advisor or accountant can provide insights into tax implications and financial planning post-divorce.
7. Be Transparent
Honesty is crucial during divorce proceedings. Attempting to hide assets or understate your financial situation can lead to severe legal repercussions. The Family Court has stringent measures to penalize non-disclosure. Being transparent from the outset can help in achieving a fair settlement.
8. Consider Mediation
Mediation can be a valuable tool in resolving disputes amicably. A mediator can facilitate discussions between you and your spouse, helping to reach a mutually acceptable agreement on asset division. Mediation is often less adversarial and more cost-effective than court proceedings.
9. Plan for the Future
Divorce is not only about dividing current assets but also planning for future financial stability. Consider updating your will, reviewing your estate plan, and adjusting your financial goals. This proactive approach ensures that your financial interests are protected long after the divorce is finalised.
Conclusion
Protecting your assets during a divorce requires careful planning and a thorough understanding of your financial situation. By keeping detailed records, considering a Binding Financial Agreement, separating your finances, protecting your superannuation, and seeking professional advice, you can navigate the complexities of asset division with greater confidence. Remember, transparency and a willingness to engage in mediation can also play a crucial role in achieving a fair and equitable settlement. Taking these steps can help secure your financial future and provide peace of mind during a challenging time.
If you would like to discuss your Family Law matter with an expert, please contact me for a confidential consultation. Your first telephone consultation is free.
Liability limited by a Scheme approved under Professional Standards Legislation.
