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NEWS - PLANNING
12-point action plan to take the sting out of divorce
3/7/2005
For those contemplating divorce, the following advice will strengthen your position and help short-circuit complications.
1 Know what's up for grabs
Don't be shy about finding out as much as you can about your marital assets, even if it means becoming a spy in your own home. If your spouse is trying to hide money or assets overseas, you'll need to be able to identify them and get exact bank account numbers. The Family Court can then order the spouse to provide a written authority to the overseas bank to supply statements. If there aren't enough assets left here to offset what's overseas, though, the Family Court cannot get overseas assets back into Australia and you may be left with nothing.
"It's essential for the innocent party to start photocopying every document they can lay their hands on - bank statements, super member statements, etc. - and to get into emails," says Marilyn Hauptmann, a partner in family law with Swaab Attorneys. "Clients who are prepared to act as an investigator in their own homes and have evidence will do very well. I've acted for many wives who didn't want to help themselves because they thought it was wrong to snoop." Get independent valuations on all the assets.
2 Split custody from property
If you try to combine custody of children and the property settlement, says financial adviser Rowan Wall, your dispute can drag on for years and bloat your legal bills.
3 Be careful about loans
If your parents lend you money - perhaps to help you buy your home - it should be properly documented as a loan. Otherwise it could be treated as a gift and your ex-spouse could land up with half of it with no obligation to pay anything back. Your parents may want to consider a limited power of attorney, Wall suggests. This means they get the right to impose a mortgage on the property if they feel the divorce threatens the loan.
4 Consider trusts
Testamentary trusts - where money is left in trust as part of an inheritance - can protect family assets from disappearing into a divorce property settlement. Assets can go to the grandchildren or they can stay in trust, with income only, not the actual asset, going to beneficiaries. They could be set up by grandparents who feel their baby-boomer children have enough and they want to provide for grandchildren instead. Or baby-boomers can themselves request this, says Wall, so they can spend more while knowing their children are adequately provided for.
5 Think ahead on earnings
If one spouse earns much more, take his or her future earning ability into consideration in the property settlement. "If one party is on $200,000 a year and the other is earning nothing, it's not going to take the bigger earner long to recover from a split of assets," says Wall. So make sure it's part of your calculations.
6 Be CGT-savvy
You may be thrilled to see you've got the larger, newly acquired, share portfolio and your ex-spouse is getting the long-held beach house. You won't be so pleased when you see the beach house attracted no capital gains tax because it was bought before 1985 when CGT was introduced. But when you sell the shares, you'll be liable for a sizeable tax hit. So in divvying up the assets, make sure you know whether they're pre- or post-CGT assets. And remember there is no CGT or stamp duty on the transfer of assets between spouses during divorce.
7 Liability alarm
When you get the assets valued, make sure you're aware of any associated liabilities, such as accounting fees or tax owing on structures such as family trusts.
8 Opt for ease
Where you've got a choice of investment assets such as a block of flats or a petrol station, the latter may produce higher earnings but is much harder to manage. Wall also suggests looking at assets that can provide a job, particularly for a spouse who has been out of the workforce for some time. This could be a house that can be converted into a shop.
9 Bring in unpaid assets
Yet-to-be-paid bonuses or upcoming inheritances shouldn't be left out of any property settlement.
10 Don't move out
Possession is nine-tenths of the law, says Wall, and if you move out of the marital home you lose control of the assets. Disputes as basic as coming back for furniture can delay settlement for months, making things even more expensive.
11 Stay on top of credit
During divorce most assets are frozen, says Wall, and this is when credit ratings can be harmed by unpaid bills to telecommunications companies, credit cards or electricity providers. Contact them to discuss the issue and make allowances if necessary.
12 Put joint accounts on hold
Ring your bank if you've got a joint account and explain that you're in dispute and that any withdrawals will need both signatures. If you have shares in both names, says Wall, tell your stockbroker not to transact unless they've got written instructions from both parties, and that if they do it's under their own liability. "Otherwise you get situations where all the money is pulled out of the bank account, or shares are sold and the proceeds deposited into another account," he says.
Repdoduced by the Australian Financial Review - 5 Mar 2005
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