When a relationship breaks down, women should not only get a lawyer but a financial planner too.
Slater & Gordon family lawyer Heather McKinnon says that in the breakdown of a marriage or de facto relationship, too often women walk out of a property settlement with a lot less super than they should have. This, she says, is often the result of the woman’s emotional attachment to real estate and a failure to get financial advice.
“In relationship breakups, very often the woman has not focused on the accumulation of superannuation and many women ignore it at property settlement time, unless they’ve got good advice. So one walks out with a big whack of super and the other doesn’t,” says McKinnon.
To protect your assets following the collapse of a relationship, McKinnon suggests women get a financial planner involved, as well as a lawyer. She says a lawyer can only take a client through the property division process according to the Family Law Act, indicating what they’re entitled to, but unlike a financial planner, a lawyer can’t advise a client as to whether it’s financially better to take the house or their share of the superannuation.
“Financial planning [advice] is really important at the time you’re dividing up because a lot of women become emotionally attached to real estate. Financial planners may advise that you’re much better to take significant super, rather than a property,” says McKinnon.
“I would say that is the difference between male and female clients. Female clients are still, in my view, not strategic enough in getting financial planning advice as to how to take the capital out of the relationship. They concentrate on the house, but they don’t really ever get [financial] advice.”
How to protect your assets from the beginning
For those in a de facto relationship, McKinnon emphasises the importance of keeping a record of assets and liabilities from the beginning of the relationship.
“When you commit to a new relationship, in terms of moving from courtship to moving into shared residence, diarise that date. Then, at about the 18-month mark, if it looks like it is going to continue, get some proper advice from a family lawyer as to what you need to do to protect your finances moving forward,” she says.
“When entering into a relationship, the most critical thing is that you have a very good set of records which establishes what your assets and liabilities are. One of the biggest issues in most court cases is what people brought in, so if you have really good documents including, if you have real estate, valuations at the time that you started living together, there can be no misconceptions about what your net worth was.”
And if you thought a binding financial agreement or ‘pre-nup’ would have you covered, think again.
According to McKinnon, binding financial agreements in Australia don’t offer much protection at all.
“There are currently big problems with pre-nups in Australia and it’s my advice that they’re not really worth pursuing at this time,” she says.
“There has been a whole lot of overturning of existing agreements and there have been a lot of reasons for overturning them.”