There is a growing trend in couples divorcing later in life. Separating or getting divorced, no matter what your age, is difficult. However, a divorce later in life – also known as a grey divorce – can pose its own unique considerations and make some of the expected consequences of a separation felt more sharply. Here’s what you need to know about divorce and separation later in life.
The average age of people getting divorced has shifted in recent years to people aged in their mid-forties, and a significant increase in the numbers of those separating after the age of fifty; often referred to as “Grey Divorce” or “Silver Splitters”.
Couples separating later in life face different obstacles compared to those who separate in their younger years. If you are facing a divorce in later life, some of the areas you may need to consider include:
- Jointly held assets: property, superannuation, businesses, investments.
- Wills and estates including executors, beneficiaries, Powers of Attorney, and guardianship appointments.
- Finances: divorce proceedings can pull the plug on your retirement plans and having to single-handedly shoulder bills you once shared, can drain your retirement saving.
Doolan Wagner Family Lawyers share the top four questions they are asked when it comes to divorce or separation later in life.
Question 1: I want to reach an amicable financial settlement with my spouse but don’t necessarily want to get divorced. Is this possible?
Divorce and financial separation are two different matters. You may reach a financial settlement with your spouse without necessarily making an application for divorce.
Although the Family Law Act 1975 (Cth) prescribes a 12-month period from the date of separation for parties to make a Divorce Application, the same does not apply with respect to settling financial matters.
Financial matters can be settled with your spouse on a final basis at any time and without the requirement of a divorce order. In fact, it is common for parties to reach a property settlement in the period of separation prior to divorce and remain separated for several years before contemplating making a Divorce Application with the Court.
A financial settlement can help parties resolve all matters pertaining to their respective and joint assets, liabilities, and superannuation. Accordingly, it is prudent to resolve those matters as soon as practicable where possible. This is also the approach favoured by the Court as provided by the “clean break” principle contained in sections 81 and 90ST of the Family Law Act 1975 (Cth) which provides that as far as practicable, the Court make orders to finally determine the financial relationship between parties to assist the parties with avoiding any further proceedings between them.
Question 2: What is the effect of having provided a bank guarantee? How can I remove myself from this potential liability as part of my financial settlement following my separation?
A bank guarantee is a promise in writing to a third party (such as a supplier or landlord) for guaranteeing that a payment will be made on your (or your spouse’s) behalf, by a third-party lender. When a loan is secured by a guarantee, it is usually secured against a property or cash deposit.
Usually, debt that has arisen during a relationship forms part of the matrimonial liabilities and must be accounted for as part of any family law property settlement.
However, with respect to bank guarantees, to assist with reducing future potential liability, as part of any financial settlement, it is important to seek that the Court makes appropriate orders with respect to each party being solely responsible for any future debts and claims which may arise. Entering into such orders is prudent in assisting with removing yourself from any potential future liability, whether known or unknown to you at the time of reaching a financial settlement with your former partner.
Question 3: We have used income splitting as a legitimate tax minimisation strategy for many years. What happens now that we are separating?
Income splitting, whether via a trust or through a company, is a legitimate means of minimising your family’s collective tax liability. Upon separation, the continuation of an income splitting practice is a decision you and your former partner need to resolve. Most people, for a number of reasons, would not see this as being a practicable long-term solution. The Court also has a duty to sever all financial ties between parties, which makes Orders regarding an ongoing income splitting arrangement likely problematic. For this reason, it is usual for one (1) party to retain the entity through which income is split and for the other party to relinquish their interests in it.
If a party relinquishes their interest in the entity through which they have historically received income and it is intended that that party no longer receive any funds from the entity, the Court will have regard to that in determining whether a property settlement is just and equitable and also in assessing whether a party has an obligation to pay their former partner spouse maintenance. In determining either of these matters, the Court can have regard to a party’s “true” income that is available to them or their income earning capacity, which may include income that was previously split or distributed to another party. It is important to remember however this is only one (1) consideration in the determination of a just and equitable property settlement and/or a spouse maintenance application, and each matter will need to be determined on the individual circumstances and merits of the case.
Question 4: I am about to receive a significant inheritance. How is that going to be treated?
The answer will depend on the circumstances of each case.
If, for example, the parties had no other assets other than the inheritance, but the other party has contributed financially and as a homemaker and parent throughout the relationship, it would be open to the Court to make a property settlement in favour of the other party from the inheritance.
On the other hand, if there are ample funds from which a property settlement can be made and one of the parties receives an inheritance, then a recently acquired inheritance would normally be treated as an entitlement of that party alone. Here, the other party cannot be regarded as having contributed significantly to an inheritance received late in the relationship or post-separation except in exceptional cases – such as the care of the testator prior to death or having looked after the inherited property. Even if the inheritance is excluded it will be considered as being available to the party in any property settlement.
Want to learn more about Grey Divorce? Visit familylawyersdw.com.au for everything you or your parent or family member who is facing a Grey Separation and Divorce needs to know.
Co-authored by Lisa Wagner, Managing Director/Principal and Christine La Cava, Senior Associate, Accredited Family Law Specialists at Doolan Wagner Family Lawyers, St Leonards.
At Doolan Wagner Family Lawyers we specialise in complex family law matters and are conveniently located in St Leonards, on Sydney’s North Shore. We have a team of experienced and Accredited Specialist Family Lawyers available to help guide you through the emotional and financial challenges of separation and divorce.
If you are considering a separation or divorce or have a Family Law enquiry, please contact us on (02) 9437 0010 or email at [email protected] to discuss your matter in complete confidence, with no obligation.
Disclaimer: These posts are only intended as an overview or comment on current issues that may interest you and are not legal advice. If there are any matters that you would like us to advise you on, then please contact us.
