Divorce can be difficult and emotionally draining. Trying to be calm, reasonable and plan effectively for the future is a tough ask at a time when it can seem like your world is falling apart. Although it may be tempting to fall into a heap, when it comes to finances, you owe it to yourself to understand what you’re entitled to.
Are assets split 50/50 in a divorce?
Many people expect a 50/50 split, but this is rarely what happens. How much you’re entitled to in a divorce can depend on a range of factors, including how long you were together, what each of you contributed in financial and non-financial terms, and your future requirements.
Let’s take a look at each of these factors in further detail, bearing in mind the importance of seeking independent legal advice to get a clearer sense of what your actual entitlements will be.
How long you were together
The length of the relationship is an important factor when dividing assets. Couples who have been together a long time may have more assets than those who are younger and in shorter relationships, so the process of dividing property can be more complex.
If it was a relatively short relationship and you each owned property in your own names before you married, some may choose to keep those assets and split any jointly owned property down the middle. But this could be a mistake in some cases, and there are many other factors to consider.
Assets, debts and financial contributions
It’s important to understand what you have, what you owe, and what you’ve contributed over time, to help ensure an equitable split.
Assets include your home, its contents, cars, investments and superannuation. Debts might include your mortgage, credit cards and car loans. Each of you may have also made direct financial contributions like your salary and wages, and indirect contributions like inheritances or gifts.
It’s also partly about what you came into the relationship with and what was contributed along the way. If it was a short marriage and you came in with a million dollars while your spouse entered with very little, it’s unlikely your spouse would end up with 50% of the total pool of money, unless there were some other factors at play.
Non-financial contributions
Domestic duties can carry significant weight when the court is determining a settlement. Maybe you cared for your children full-time while your partner was at work, plus you cleaned and looked after the house.
Or perhaps you put many unpaid hours into a renovation that increased the value of your house. These are some examples of non-financial contributions that may be considered in a property settlement.
Future requirements
When determining who gets what, a court will examine your current needs, as well as what you might need in the future.
You might have health needs for example, or your earning capacity might be lower due to time out of the workforce. Perhaps you need to retrain to get back into work, and that costs money.
Understanding and forecasting future needs can get tricky, and it’s best to get professional advice. A financial adviser can help you understand your financial position, while a lawyer can help figure out what your entitlement should be to ensure your ongoing financial stability.
Superannuation in a divorce settlement
When working out a divorce settlement, it’s important to think about your future, your earning capacity and your retirement. That’s where superannuation comes in. In my experience, many people don’t look at splitting super in a divorce because they don’t understand how it works and grows over time.
Some take the house at the expense of super, only to find they can’t afford the repayments or upkeep expenses. Or they may plan to sell the house to provide for their retirement, but this can have a range of problems as a strategy too.
There’s no secret formula to splitting assets in a divorce. Each marriage is different, so don’t be tempted to compare your divorce with other people’s.
The ultimate aim is to make the asset split meets the “just and equitable” test, meaning it needs to be fair for both parties. Staying focused on the future throughout the divorce process will help ensure you make smart decisions, helping you move on and live comfortably.
Where to go for help
As a general rule, your number one priority when you’re going through a divorce should be getting good professional advice. Ideally, this means talking to a family lawyer and a financial adviser before you sign on the dotted line. You may also consider consulting a counsellor.
If you’re concerned about the costs of these services, an alternative is to call the Family Relationship Advice Line for free assistance. Depending on your circumstances, you may be eligible for Legal Aid or help from a Community Legal Centre such as the Women’s Legal Service in your state or territory.
About Helen Baker
Helen Baker is a licensed Australian financial adviser with a Masters in Financial Planning. She is the founder of On Your Own Two Feet and the author of two books: On Your Own Two Feet – Steady Steps to Women’s Financial Independence and On Your Own Two Feet Divorce – Your Survive and Thrive Financial Guide.
Main image source: itakdalee (Shutterstock)
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