Most property settlements after separation are reached through negotiation, without the need to attend Court. However, before finalising any agreement, it is important to understand the short-term and long-term financial impact of the proposed settlement.
When a relationship breaks down, separating couples must consider how assets, liabilities, superannuation and other financial resources will be divided. While a family lawyer can provide advice about your legal rights and obligations, working alongside a financial advisor can help ensure the proposed settlement supports your future financial position.
Property settlements can be formally documented in several ways, including through Consent Orders or a Binding Financial Agreement. If an agreement cannot be reached through negotiation, either party may need to commence proceedings in the Federal Circuit and Family Court of Australia, where the Court will determine how the property should be divided.
This article explains some of the benefits of working collaboratively with both a family lawyer and financial advisor when negotiating a property settlement.
Understanding Your Financial Position Before a Property Settlement
Before agreeing to a property settlement, it is important to have a complete understanding of the parties’ financial circumstances. This includes identifying all assets, liabilities, financial resources and potential future financial obligations.
A financial advisor can work with your lawyer to help assess the financial consequences of different settlement options and provide advice about how the division of assets may affect your future financial security.
Identifying and Classifying Assets and Liabilities
A financial advisor can assist with properly identifying, classifying and evaluating the parties’ assets and liabilities, whether they are held jointly or individually.
Assets can be owned or structured in different ways, including through:
- Trusts
- Companies
- Shares and investments
- Real estate
- Business interests
- Superannuation accounts
It is important that a complete picture of the asset pool is obtained before negotiating a property settlement. Without a full understanding of the parties’ financial position, it may be difficult to determine whether a proposed agreement is fair and reasonable.
In some circumstances, your lawyer or financial advisor may recommend obtaining a formal valuation of certain assets, including:
- Family businesses
- Company interests
- Shares
- Investment properties
- Other complex financial assets
Considering Tax and Financial Implications
The tax consequences of a property settlement can have a significant impact on the final outcome for each party.
Different assets may have different financial consequences depending on whether they are retained, transferred or sold. This may include considerations relating to:
- Capital gains tax (CGT)
- Stamp duty
- Future tax obligations
- The ongoing costs of maintaining particular assets
A financial advisor can help identify strategies that may improve the financial outcome of a settlement by considering which assets may be more beneficial for each party to retain.
For example, keeping the family home may appear financially beneficial, but future mortgage costs, maintenance expenses and potential CGT implications may also need to be considered.
For more information about capital gains tax, visit the Australian Taxation Office (ATO) website.
Advising on Superannuation
Superannuation is often one of the largest assets considered during a property settlement. Although superannuation is generally treated differently from other property, it can be divided between separating couples through a superannuation splitting agreement or Court order.
If a superannuation split forms part of a proposed property settlement, each party’s retirement position may change significantly.
A financial advisor can help assess the impact of a superannuation split and provide advice about:
- Future retirement planning
- Superannuation contributions
- Balancing immediate financial needs with long-term financial security
- The impact of receiving other assets instead of superannuation
For advice about how superannuation may be considered during separation, speak with our family law team.
Assessing Future Financial Needs and Planning Ahead
Separation often creates significant changes to a person’s financial circumstances. A financial advisor can help develop strategies to rebuild financial stability and plan for the future.
This may include:
- Creating a realistic budget after separation
- Managing ongoing expenses
- Reviewing insurance needs
- Protecting income and assets
- Developing strategies to work towards future financial goals
Financial advisors may also assist with understanding financial matters connected to separation, including family tax benefits and child support obligations.
Estate Planning After a Property Settlement
Once a property settlement has been finalised, it is important to review your estate planning documents to ensure they reflect your new personal and financial circumstances.
A family lawyer and financial advisor can work together to help review matters such as:
- Your Will
- Enduring powers of attorney
- Superannuation beneficiary nominations
- Life insurance arrangements
- Ownership structures for assets
Updating your estate plan after separation can help ensure your wishes are followed and may reduce the risk of future disputes involving your assets.
You can learn more about protecting your future through our Wills and Estates services.
Why Legal and Financial Advice Should Work Together
Separating couples often face difficult decisions about their immediate financial needs and future security. While lawyers provide legal advice about property settlement options, financial advisors provide guidance about the financial consequences of those decisions.
Working collaboratively with both professionals can help ensure that a proposed settlement considers:
- Your legal rights and obligations
- The value and structure of assets
- Tax implications
- Retirement planning
- Your long-term financial goals
Conclusion
Negotiating a property settlement can be complex, particularly where there are significant assets, businesses, trusts or superannuation interests involved.
While a lawyer can provide advice about achieving a legally binding settlement, including a financial advisor as part of your professional team can provide valuable insight into the financial impact of different settlement options.
Obtaining both legal and financial advice can help you make informed decisions and work towards a settlement that provides greater financial certainty for the future.
Need Advice About a Property Settlement?
If you are separating and need advice about dividing property, assets or superannuation, our experienced family lawyers can provide practical guidance tailored to your circumstances.
Contact Somerville Laundry Lomax for a confidential discussion. Call 02 6621 2481 or email [email protected].
This article provides general information only and is not intended to be legal or financial advice. You should obtain professional advice specific to your circumstances.