19 Dec Property Settlement After Separation or Divorce: The Top Mistakes Female High Income Earners Make During Divorce
High net worth divorce and separation cases are not unusual in Australia. Of course you have your highly publicised divorces between public figures. But you also have the more common situation where one or both of the ex-couple are educated professionals making more than six figures or have inherited generational wealth or family businesses.
There is a lot of advice out in the world for women who have supported their spouse to achieve a high-income career at the expense of their own. But there’s less focus on how high-income or wealthy women can protect their property – particularly inherited property and wealth – after separation or divorce.
In fact, there are common mistakes women who are divorcing or separating often make. And when they have property, businesses and generational wealth to protect this can have some serious repercussions.
Property settlement after separation or divorce
Property settlement after separation or divorce is an important part of the process. But if you’re not sure what your obligations are, or how to find the information, it can also be confusing and time consuming. And that’s when mistakes can happen, whether you’re a man or a woman, a high income earner or a stay-at-home spouse.
In this article, we’ll dive into some of the common mistakes our high-income earning female clients often make, and reveal better approaches for better outcomes.
Top mistakes female high income earners make during separation and divorce
Soft dealing of property settlements
We aren’t arguing that you should head out of the gate being contrary and difficult. But too often women believe that if they are ‘soft’ on their ex-partners when it comes to property settlements, that they’ll be easier to deal with when it comes time to determine the terms of the children and child support arrangements. This approach has it’s draw backs.
It is way more sensible to negotiate on all aspects of your family settlement so that all factors are taken into account at the same time being property, children’s arrangements and child support issues.
Amicable divorces and separations are possible, of course. But in that case, both parties are happy to make concessions to ensure the outcome is fair. If you are the only one compromising, then you need to rethink your negotiation strategy.
Failing to adequately separate out generational wealth and inherited businesses
If you’ve inherited money or a family business , you’ll want to protect it. This is something that your parents or grandparents have worked hard to leave you, and you certainly don’t want that to go to your ex-partner.
Of course your financial contributions, in this way, will be a consideration in the final outcome and the larger your financial contribution the greater impact that will have on the final outcome.
For those types of assets to be taken into account, the Court looks towards control, in that who has the ultimate control/possession of that asset.
If you have borrowed money from your family during the relationship then for that borrowing to be recognised as a real debt you must look at establishing a written commercial agreement that is also acknowledged by your partner as well and at the time the monies are lent.
Misunderstanding premarital assets
Many people – women included – fail to adequately understand where the law stands in terms of assessing what their assets are. This is particularly true around non-marital property. In fact, we often see wealthy women who simply believe that those pre-marital assets will be theirs upon separation or divorce.
Unfortunately, that’s not always the case. Understanding what goes into your property pool is a complex process, and one that’s unique to you. Getting advice is the best way to manage this process and protect your property.
Not being aware of financial infidelity
Financial infidelity is when one partner lies to the other about money issues. This generally applies when the couple has combined finances, and it can include hiding debts, keeping bank accounts or credit cards secret, making extravagant purchases and lying about how you use money generally. One partner may even go so far as to siphon money away into separate accounts that the other is not even aware of.
When women are the high income earners in the family they may be more at risk of financial infidelity by their partners. They might not have as much time to focus on managing affairs at home, and they may trust their partners to deal with things well and honestly. But when marriages break down, this trust can prove to be misplaced. And the risk that their ex-partner could abuse their shared finances is real.
Keeping track of the money in your accounts, ensuring that you know when and how it is being spent, is vital to an equitable property settlement after separation or divorce. If you don’t know what you have in assets and debts, then it does make it incredibly difficult to make sure your asset base is accurate.
Letting your ex-partner keep the family home
Many times women will want to make a clean break and a fresh start. Leaving the matrimonial home is one way to do that. However, letting your ex-spouse retain the family home when you have the funds to buy him out doesn’t make good financial sense.
Buying a new home – that will give you a similar quality of life – will be a much more expensive process. You’ll need to pay a deposit, stamp duty, legal fees and inspection costs – and even high income earners may struggle to pull those funds together quickly post separation. If you pass up the opportunity to buy your ex-partner out of the family home, you’ll miss out on a lot of benefits.
Letting your ex-partner keep the family car or household property
Similar to the issue with the home, letting your ex-partner keep the family car or the household property is not usually a good financial decision. While they may have to pay you fair value for those items in a property settlement, the value will be for your goods in their current state – and even if you’ve purchased them recently, that is still second hand.
The amount you receive for those items simply won’t be enough to buy you something of similar quality brand new. In fact, you may find yourself having to pay twice what your car or household items were worth and struggling to replace them.
Absence of binding financial agreement
A binding financial agreements (or BFAs) are often commonly known by the American term ‘prenup’. They are legally binding documents under the Family Law Act that stipulate how a couple’s assets will be distributed when a relationship breaks down.
BFAs are an excellent way to protect your assets. But unfortunately, many wealthy women fail to set one up in a timely fashion. When you enter into your next relationship, make sure you enter into a BFA as soon as reasonable – the earlier in the relationship, the better.
Getting the wrong advice
Often wealthy individuals have experts around them advising them on various aspects of managing their money. However, unless their experts on family law, these business accountants and even lawyers (who don’t practice family law) may not be giving you the best advice for your situation.