Divorce is a challenging period, both emotionally and financially. One of the main concerns during a separation is the protection of personal assets. In Australia, asset division is governed by the Family Law Act 1975, ensuring fair distribution. However, there are several strategies to help safeguard your assets during this process.
Understanding Asset Division in Australia
The Family Court follows a structured approach to asset division, considering factors such as the duration of the marriage, contributions of each party, future needs, and overall fairness. The process involves:
- Identifying and Valuing Assets: This includes properties, superannuation, investments, and liabilities.
- Assessing Contributions: Both financial (e.g., income, inheritances) and non-financial contributions (e.g., homemaking, childcare) are evaluated.
- Considering Future Needs: Factors like age, health, earning capacity, and child responsibilities are considered.
- Achieving a Fair Distribution: Ensuring the division is equitable for both parties.
Strategies for Protecting Your Assets
1. Maintain Detailed Financial Records
Keeping thorough records of all financial transactions, assets, and liabilities is essential. This documentation helps establish your contributions during the marriage, making it easier to navigate asset division.
2. Consider a Binding Financial Agreement
A Binding Financial Agreement (BFA) can be created before, during, or after marriage, detailing asset division in case of a separation. Used before or during a relationship they act as a “pre-nuptial agreement” and are an effective way of ensuring the financial outcome of a separation known and avoids legal expenses at that time. It’s crucial to seek independent legal advice to ensure the agreement is fair and legally binding.
3. Separate Your Finances
When anticipating divorce, separate your finances by opening individual bank accounts and directing your income into these accounts. This helps clearly define your financial status post-separation.
4. Understand Your Superannuation
Superannuation is often a significant marital asset. Understand the entitlements and consider superannuation splitting orders to ensure a clear division of these assets. Consulting a financial advisor can provide valuable insights.
5. Be Cautious with Joint Accounts and Loans
Joint accounts and loans can complicate asset division. Pay off joint debts, if possible, and close joint accounts to avoid further financial entanglements and potential credit issues. Be very careful about redraw facilities on existing loans, make a request with the bank that a joint authority is required to withdraw any funds.
6. Evaluate the Family Home
The family home is often a major point of contention. If you wish to keep the home, ensure you can afford the mortgage and maintenance costs. Selling the home and splitting the proceeds might be a practical solution for both parties.
7. Seek Professional Advice
Engage a family lawyer early in the process to understand your rights and obligations before taking any action. Legal advice helps navigate asset division complexities and provides tailored strategies. Financial advisors can also offer insights into tax implications and post-divorce planning.
8. Be Transparent
Honesty during divorce proceedings is crucial. Attempting to hide assets or understate your financial situation can lead to severe legal consequences. Transparency from the beginning can facilitate a fair and quicker settlement.
9. Consider Mediation
Mediation can help resolve disputes amicably. A mediator facilitates discussions between you and your spouse with the assistance of your respective lawyers, helping reach mutually acceptable agreements on asset division. Mediation is often less adversarial and more cost-effective than court proceedings.
10. Plan for the Future
Divorce involves not just dividing current assets but also planning for future financial stability. Update your Will, review your estate plan, and adjust financial goals to secure your interests long-term.
Protecting your assets during a divorce requires careful planning and understanding of your financial situation. By maintaining detailed records, considering a Binding Financial Agreement, separating finances, protecting superannuation, and seeking professional advice, you can navigate asset division confidently. Taking these steps ensures your financial future and peace of mind during a challenging time.
At Clarity Lawyers, our mission is to help you gain clarity and take the next steps in your life. Whether you need guidance before moving in with a new partner or are seeking the best outcomes after a separation, we’re here to support you. Our approach is both compassionate and dignified. While we’re prepared to use firm strategies when needed, we believe in fostering amicable relationships, as experience shows that a cooperative approach often yields the best results.
