When a couple that has been together for a long time considers splitting up in their older age, the impact on them and their finances can be significant. It’s really important to think about what’s at stake before you make the decision to split up. The choice between divorce and separation will have long-lasting effects on your future, so you really need to think hard about whether this is the right path for you.
Divorce is the official end of a marriage, and while that might sound straightforward enough, it’s actually separate from the rest of the stuff you need to sort out, like what you’re going to do with your home and any children.
Dividing assets when you’re older
A lot of couples in their 50s, 60s and beyond have a pretty complicated picture when it comes to their assets. This can include things like:
- Your family home and maybe even a holiday home or investment properties too
- Joint or individual business ventures
- All sorts of investments, whether that’s super or just general savings, and whether that’s in your own name or through more complicated things like self-managed super funds or trusts
When you’re dealing with family law, all of these assets – whether they’re shared or not – tend to get lumped together. Figuring out how to split all of this up can be a real battle – and it’s not just about getting to the end result, it’s about doing it in a way that’s fair and doesn’t cost an arm and a leg. Timing also matters because selling some of these assets to get settled might not make sense, given the state of the market and could also mean you end up paying more tax than you need to.
Most people sort out the practical stuff – like your property and financial arrangements – before they actually get divorced, but if you do get divorced before you’ve sorted out those things, then you’ve got to get your property sorted within 12 months of when the divorce actually goes through. And it’s the exact date of when the divorce comes into effect that’s important here – because there’s a strict 12-month deadline for sorting out your property after that.
Superannuation: it can get complicated
It’s pretty common for couples to have really different super balances – especially if one of them has been out of work for a while, for example. And when you’re splitting up, figuring out how to divide that super fairly is one of the biggest challenges you’re going to face.
You can generally split super in one of three ways – you can do a formal agreement, get consent orders or have the court sort it out for you. But the thing is, getting the best outcome usually requires some sort of expert advice – and not just to figure out the technicalities either, but to make sure that, in the end, you’re getting the best deal for yourself given your own unique circumstances.
Getting a super split probably means transferring some of the funds from one person’s super to the other’s, rather than just taking money out – and usually that means the funds just stay put until you retire. You should also make sure you update any life insurance or binding death benefit nominations that might still be naming your former partner.
Estate planning and inheritance risks
The moment you separate, it’s really important to get your estate planning sorted – that includes updating your will, your Enduring Power of Attorney and your Enduring Guardianship documents. Why? Because your relationship status affects all of these things – and you need to make sure that everything is set up to reflect your current wishes. The thing is, a separation or divorce doesn’t just magically change your will – you’ve actually got to update it to reflect how things have changed. If you don’t have a will and you die before your divorce is final, then your ex-partner could actually end up getting all of your property – which probably isn’t what you had in mind.
Assets that you’ve inherited, or plan to pass on to your kids, can actually form part of a property settlement if you haven’t structured or protected them properly. If you don’t do some careful planning upfront, then you can end up undoing all of your long-term plans by accident.
The cost of living on your own
Living by yourself can end up being a lot more expensive than you thought it was going to be. Managing your money after a split is a major challenge – and it’s not just about the obvious expenses like rent or mortgage repayments. If you cut your household down from two people to one, a lot of expenses don’t actually go away – like the cost of property insurance, rates, utilities or car maintenance. According to some research, a single person’s household typically needs around 70% of the income of a couple to meet average living costs – which is a pretty big problem when your post-divorce income tends to drop a lot further than that.
Research done by the University of Melbourne found that men tend to experience a 5% reduction in disposable income after a split, while women see a drop more like 30%. And housing is another major issue – if neither of you can afford to keep the family home, then selling it might be your only option. And if you’re having trouble getting a new mortgage on your own, or trying to navigate a tough rental market, that can be a real problem – especially in your older age.
Spousal maintenance considerations
On top of all of the property stuff, if you’re getting divorced, the Family Court of Australia might order one of you to keep paying money to the other – known as spousal maintenance. When the court is deciding on this, they’ll take a look at things like your income, your earning capacity, your age, health, your financial needs and whether there are any dependent kids. There are tight time limits: most people need to lodge an application for spousal maintenance within 12 months of getting divorced, or 24 months if they were in a de facto relationship. In the course of legal proceedings, the other party can both receive and contest a spousal maintenance application.
Impact on Centrelink entitlements
Cutting down your assets and income can sometimes surprise you by making you eligible for government support. After a separation, you may find you’ve fallen below the threshold for benefits run by Centrelink, like the Age Pension, even if you were previously too well off to qualify.
Tax implications and benefits
Getting a grey divorce or separating late in life can make understanding the tax implications a vital part of working out your financial future. Under the Family Law Act, the way assets are split up and financial issues get sorted out can have a big tax impact, so you really do need to get financial planning advice from a qualified financial planner.
In Australia, the Federal Circuit and Family Court of Australia oversees divorce applications and property settlements, and the court usually takes into account the tax impact of any proposed arrangements. Even if you got married overseas but have since become an Australian citizen, you may still be able to apply for a divorce in Australia, but it’s a good idea to get advice from a family law expert so you understand both the legal and tax requirements in your situation.
As you start living separate lives, even if you stay in the same house for a while, you may need to prove your separation to the court or other parties like Centrelink. Keep your marriage certificate and other essential documents handy – you’ll need them during the divorce process. A court order or formal separation agreement can help clarify things financially and support your case when dealing with government agencies or banks.
A divorce can also open up new tax possibilities. For instance, you may become eligible for certain tax deductions or concessions that weren’t available to you while you were married, such as deductions for childcare or education expenses. On the other hand, dividing up your assets, such as a house, investments, or superannuation, can trigger capital gains tax or affect your eligibility for government benefits. This is why it’s a good idea to get your financial affairs sorted out with a financial planner who can provide a Financial Services Guide outlining all the financial services, investment advice and banking guidance they offer.
A financial planner can help you work out what you want to achieve financially, sort out your financial products and plan for the future, making sure you make informed decisions about your property settlement and ongoing financial matters. They can also help you understand the costs involved, explain the implications of different settlement options and help you reach your goals as you move into a new stage of your life.
And ultimately, sorting out the tax implications of getting a divorce is about more than just doing what you have to do – it’s about protecting your financial interests and planning for a secure future. By getting professional advice and staying on top of your rights and responsibilities under family law, you can navigate the complexities of separation with a bit more confidence and clarity.
Grey divorce is expensive – but guidance helps out
Legal fees alone can take a big bite out of a settlement, particularly if assets are complicated and disputes arise. But legal advice is just the beginning.
A financial planner can play a big role in helping you understand your cash flow, structure settlements tax-effectively, reassess your retirement plans and rebuild financial security. Investing is a key part of financial planning, and professional advice can help you develop investment strategies to grow your wealth and meet your long-term needs. While there’s every kind of financial tool and robo-advice online, a computer program just can’t answer your questions or give you tailored advice for complicated situations. Dispute resolution services are also available to help sort out family conflicts after a separation, and can provide referrals and support for things like parenting arrangements.
If you file for a divorce on your own and the other party doesn’t object, you won’t need to go to court. A divorce order usually becomes final one month and a day after it’s been made, and you can only remarry once your divorce order is final. With the right advice, the financial path through a grey divorce or late-life separation can be a lot clearer, less stressful, and far more sustainable. Get in touch if you are navigating a separation or divorce to see how we can help.