Separating or divorcing after the age of 50 can have a significant impact on your retirement.
A separation later in life, may mean that you are required to work more years than you had planned, a reduction in your income, or you may be required to find a part-time job.
If you have recently separated, or you are considering separation, it is important that you plan carefully and make thoughtful decisions about how the assets are divided and the best way to manage the money you will receive from a property settlement so that you can protect your retirement plan.
You can minimise any negative financial impact to your retirement by avoiding these four common mistakes:
Retaining the Former Matrimonial Home
The former matrimonial home may be your haven, but it can also be a dicey asset to retain given that the future value is unknown at the time of separation and unexpected expenses relating to the former matrimonial home may arise. You will need to consider whether you can now meet the expenses such as the rates, insurance, mortgage as well as costs to maintain the former matrimonial home on your own.
You will need to consider whether retaining the former matrimonial home is in your financial interests. In some cases, it may be that superannuation is a more predictable asset to maintain.
Don’t Ignore Tax Implications
It is important to remember that the division of assets that you agree to may have tax consequences. You should seek financial advice from your Accountant before finalising a property settlement to avoid any unexpected tax consequences.
Superannuation entitlements may have tax implications if you draw down an amount in a lump sum. Questions that you may need to ask your Accountant are, shall I take it out in instalments or one lump sum?
Alternatively, you may be thrilled that you’re receiving the investment property that you have been holding on to with your former spouse; however you may also be receiving a hefty capital gains tax that will lower your overall division of the property pool.
It is important that any tax consequences are factored into the property pool to avoid unexpected costs in the future. It is a good idea to have your Accountant review the proposed agreement so that you can obtain advice early on in the negotiation process regarding your financial situation.
Underestimating Your Expenses
It is important that you take the time after separation to prepare a new budget to cover daily and monthly expenses. Remember that your household income may now be reduced to one income earner. You will need to take a realistic look into how much funds you will need in order to meet your day to day living expenses.
Commencing Court Proceedings
There is no doubt about it that timely Court litigation is not good for your mental health or your financial health. Breathe. Thoughtfully consider other alternatives to litigation.
Navigating through rough waters is sometimes a part of separation or divorce; but it doesn’t have to be that bad. In countless cases, separation or divorce, when done by way of collaborative law, is by far more fruitful in terms of dividing the property pool than the traditional model of family law. Collaborative Law is a respectful way to separate; therefore, both individuals end up feeling good about the outcome.
Collaborative Law ensures that both individuals needs are met so retirement isn’t compromised. It is a win-win outcome.
If you are considering a separation or divorce, it is important to plan the process so that it places you in a stronger position post-separation. Planning will help you create a clear picture of what is involved so that you can make an informed decision about whether separation or divorce is right for you.
Grace Family + Collaborative Law will help you create a strategy for your future before you make any decisions impacting your future. A legal strategy is important in ensuring an amicable separation and avoiding common mistakes that may have an impact on your future.
Schedule a free 15 minute clarity call with a Collaborative Family Lawyer today.
www.gfclaw.com.au