The financial impact of a relationship breakdown or divorce can be significant. Matrimonial money and assets are split and one or both parties can find themselves in a situation where they are financially depleted and having to rebuild their personal wealth.
However, life after divorce can often include re-partnering and as a new relationship gets serious, it’s important to talk about one another’s financial circumstances so financial fairness can be established now, and in future.
Failing to establish financial guidelines and boundaries that define what’s yours exclusively, and what you share as a couple, could result in another marital settlement if the relationship was to breakdown.
With fewer working years left to recover financially, the effect on your lifestyle, personal and family wealth could be difficult or even irreparable. Taking a pragmatic and proactive approach to each of your financial circumstances, is crucial for both your financial and relationship health.
Protect your assets
When relationships sour, it’s not uncommon for financial attacks on your personal or business assets. Asset protection is essential regardless of your relationship status and needs to be reviewed and updated as your life circumstances change.
Asset protection is both a financial and legal matter and it’s important to seek advice from your financial planner, who in collaboration with your solicitor, can help you decide on how property, shares and other assets should be held, and whether or not it forms part of your Estate individually or jointly.
Trusts can provide an effective means for averting unwarranted claims against your assets and estate. They also provide a vehicle for managing tax, which should be considered as it can have a considerable impact on your overall financial and personal wealth position.
Update your Wills, EPA and Estate Plan
For high earning individuals with significant personal wealth including multiple assets and family money obligations, an up to date and clearly articulated Will, Enduring Power of Attorney AND an estate plan that will likely address ‘bloodline’ complexities when intergenerational family money is involved, is crucial.
In my experience, collaborative advice involving your financial planner, solicitor and often a tax specialist, usually delivers better outcomes particularly when there is financial complexity that includes ex and current spouses and blended families.
For some executives and senior managers, secondment to overseas roles can create residency issues and laws which may be unique to a local jurisdiction, which can create further complications (and significant expense to resolve) should you pass away while working and living overseas.
Business Owners
Similarly for business owners, consideration needs be given to the management and control of your business entities, should you become incapacitated or pass away.
Personal risk insurances that includes buy/sell arrangements with documented trigger events that include death, disability or divorce are important for enabling your business partners to can carry on should your personal circumstances prevent you from doing so.
Review your Binding Nominations
It is common for personal risk insurance policies and superannuation funds to have Binding Death Nominations. These documents provide instructions for the insurer or fund trustee for the distribution of the money as a lump sum insurance claim or funds held in super to your nominated beneficiaries, should you pass away.
You need to keep these details up to date regardless of your relationship status, but it’s particularly important should you divorce, and then if you remarry to ensure those you wish to benefit from your financial legacy, do.
Next steps
For high earning executives, professionals and business owners, relationship breakdown will often include additional complexities as spouses may be included in financial planning and tax management strategies.
So too for executives who may have an executive share scheme. It will all need to be factored into establishing the value of marital wealth and divvied up.
Clarifying the financial position of each party, can be a sensitive discussion for a couple embarking on a new relationship, nevertheless it’s an important one.
In my experience, the solution is to bring in the professionals, financial planners to represent each of your financial circumstances and your solicitors who will provide advice and any legal steps as required.
For a confidential discussion about your financial relationships, divorce and re-partnering please contact James Marshall on +61 (0) 7 3007 2080 or email contact@executivestrategies.com.au
To learn more about James, visit this link.
Further Reading:
You can read my earlier article about tax and financial planning here.
Executive Strategies is a specialised information hub for executives and senior managers who may have founded their own business or who work for growing private, ASX listed companies or government businesses. Its purpose is to provide access to specialist advisers and information that addresses the often-complex issues affecting their personal prosperity.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth ABN 54 139 889 535 AFSL 357306. This advice is general and does not take into account your objectives, financial situation or needs. You should not act on it without first obtaining professional financial advice specific to your circumstances.
*Please note: For advice and services relating to this matter that are not offered under the Fortnum Private Wealth AFSL, in accordance with our collaborative advice model, when required, such matters are referred to appropriately qualified professionals.
