How to: help a friend during separation

As the separation and divorce rates continue to increase most of us will have a friend, or more likely many friends, who will experience this all too painful process at some point.

With the complexities of modern life – with everything from step-families to intricate family trusts being involved in many families – the days of armchair advice may be over; family law is such a multifaceted jurisdiction that obtaining expert legal advice is a necessity.

But what hasn’t changed is a persons need to have a friend to talk to. However, as a friend, knowing the right or wrong thing to say can be overwhelming especially considering the emotional sensitivity of the issues.

While each separation will be different – and each person too – here are a few tips for helping a friend through this stage and still keeping the friendship intact:

• Do your best to remain objective. Of course you are there for them but when you think their focus is on the wrong thing tell them so that they can begin to move on.
• Be calm and rational - point out to them when they are making decisions based only on emotion and encourage them to see that more time and research might be wise.
• Do not overly bad mouth the ex. You can listen and support without increasing the drama.
• Encourage them to get counselling, regardless of whether they feel it is needed. Everyone can use the help of a truly objective set of ears that has no motive other than to help them move on.
• Encourage them to look good on the outside, exercise, buy something new, get a new haircut, etc. This is not shallow - separation can destroy self-confidence and sometimes it takes help to rebuild it.
• Set boundaries around when to discuss their separation and when it is time to just have fun – separation can be all consuming and a break can be one of the best things.
• Remind them that this does not define their life -- it is an event in their life. And how they move through it is a reflection of who they will be.
• Help them reflect on their language to ensure they are using positive language about the future.
• Lastly -- just be there for them with open arms, love and honesty.

Times change, naturally so too does divorce

Over the years family law (to use the broader term for ‘divorce’) has altered quite dramatically – with the single most significant reform being the introduction of the Family Law Act in 1975.

The introduction of ‘no-fault divorce’ and later the recognition of superannuation as a financial asset in property division and more recently the extension of property division legislation to de facto couples (to name but three) are not only substantial legal developments but represent, either as a portent of change or maybe even a generator of change, the immense societal change that has occurred over the past 40 years, including:

 

• The rate of marriage has decreased

Sometimes there will be a headline claiming that the rate of divorce is down. And in some individual years it is, compared to the previous year. But, in an historical context, of more significance is the fact that the rate of marriage is down.

 

Nowadays, many couples choose to live together in de-facto relationships before marriage, and increasingly, instead of marrying at all. And they do so without the social repercussions that would have occurred in the past – employers don’t discriminate on the basis of living arrangements, banks lend de facto couples money for a home, and schools enrol children whose parents are not married. Think about how our grandparents or great-grandparents would have talked - such a choice would have been scandalous one or two generations ago.

Whatever the greater societal reasoning, since 2009 (in many states, 2010 in the others) the Family Law Act has applied to both married couples and de facto couples who separate and wish to divide their property and it has applied to the parenting arrangements for children of de facto couples for significantly longer – meaning that the law, now the same for married or de facto couples, better reflects society.

• More often it is the female partner that initiates property division or seeks parenting arrangements

There are any number of reasons why a couple may separate – for which either person in the relationship may be responsible – but increasingly women are initiating the legal separation.

And it is often said that this is attributable to two things: societal acceptance of separation and financial independence. From an historical perspective many women felt they had to be married to achieve financial stability, however, today women are more likely to be educated and in paid employment – they are in a position to see marriage (or a long-term relationship) as a choice, and not a necessity. Not only are they more financially independent but as the social stigma of divorce has dissipated they can also rely on both family and friends for emotional and practical support.

I also believe another reason may be that cases decided by the family law Courts over the years have encouraged a faith that contributions made throughout the relationship will be properly recognised in any property division, including:

• the recognition of superannuation as an asset available for division  - a significant development, as in the past some couples had no other assets available for division and the husband (historically the gender with the greater superannuation interest) would retain the entire superannuation despite the contribution made by the wife who had raised the children and kept the home thus allowing the husband to work and accumulate the superannuation; and
• the recognition of the Court’s powers to obtain assets held by companies and trusts  - another significant development, as there have been numerous instances of assets being placed in the ownership of separate legal entities although often practically speaking that entity is one of the parties, meaning that without the extension of the Court’s powers the asset may not be available for division.

• That “grey divorce” is increasing

Something is a trend when it gets its own name – and separation later in life is definitely on the increase. A steady rise in life expectancy, the budding number of women who are financially independent and the increasing social acceptance of separation are all said to be behind this trend.

Three questions kids ask about separation and divorce

From what my clients have told me over the years, children tend to ask the same kinds of tough, wrenching questions about separation and divorce – sure, the words they use and their attitude will depend very much on the individual child and their circumstances (such as gender and age) but at essence it boils down to just three questions.

The good news is that, according to the counselors I speak to, parents don't have to have all the answers. Instead it’s about looking beyond the question and getting at what kids are really asking for – affirmation, comfort, and reassurance. Because, at the end of it all they want to be assured that you love them no matter what, it’s about being ready to listen and respond in a way that will help your kids get through this time.

Here are some tips on the three most common questions:

1. Why? From "why did you stop loving each other" to "why are you doing this," kids often ask about the big-picture reason behind your decision to separate. The counselors say that the reason behind this question is a fear that if Mum and Dad can stop loving each other, they might stop loving their kids, too. So you need to assure your child that love between parents is very different from a parent's love for their child. Your love for them is permanent and will never change. The answer to this question is not the details of why you're separating but instead, reassure your child that you are still a family, just a different kind of family.

2. Is this my fault? Young children, especially, are self-centered. This is not their fault – its biology. So they can't help wondering if they are somehow at fault for your split. Again, the most important thing here is to assure your child that your love for them is unconditional. They need to know their parents' complicated relationship has nothing to do with them -- they are not the cause of the divorce. They will always be loved and that will never change.

3. Where will I live? Make sure you have agreed on a plan - even a temporary one - before you break the news to the kids. Tell them where they will be, when, and for how long. In some circumstances it might be a good idea to tell them that they can express their feelings about these arrangements to you any time they need to. And always speak respectfully about your ex, their home and their extended family in your answers – while it can be tough to do, this is about giving the kids some reassurance not about how you might feel.

*The above does not necessarily apply to teenagers but it can – the questions and attitude is likely to be different but the need for reassurance is probably still at the root of it all.

Relocation: other side of town or the other side of the world

One parent moving with the children to another town, state or country after the breakdown of a marriage or relationship is known as ‘relocation’.

Whether it is something that you are thinking about at the time you separate – perhaps for financial reasons or emotional ones (such as a support network) – or months or years after separation relocation can be a difficult issue to resolve.

If your children primarily live with you and you need to relocate you should first try to talk to the other party. You may be able to reach agreement that the move is in the children’s best interest – perhaps the children have longer periods of time in school holidays with their other parent and/or longer visits during the year. Or the other parent may be able to move to where you are hoping to relocate.

If you reach agreement with the other party it is best to enter into a written parenting plan* or apply for consent orders* before you move.

If you cannot reach agreement with the other parent, you can apply to the Court for a relocation order to allow you to move. It is important to remember that a relocation order is not automatic and that the Court may not grant permission for the children to relocate. As with all matters about the care and welfare of children, the Court must consider the best interests of the child.

If you move without a Court Order or without the consent of the other parent, the other parent may apply for a Court oOder requiring you and/or the children to return until the Court has considered the parenting arrangements. If there is a Court Order already in place allowing the other parent to spend time with the children and you relocate anyway, you will be breaking the existing Order and the other parent can apply to enforce the current Order requiring the return of the children.

Further, if there is a possibility or threat that the children may be removed from Australia, the other parent can apply to the Court for an Order restraining the removal of the children from Australia.

 

* Note: a Parenting Plan is a non-enforceable written agreement that sets out parenting arrangements for the children as agreed to by both parents without the need to apply to the Court. A Consent Order is a legally binding written agreement between you both that is approved by the Court. If you already have Consent Orders in place you can vary them with a Parenting Plan, the terms of which are then binding.

Till death us do part?

According to research by the Australian Institute of Family Studies there has been a sharp increase in the number of couples separating after 20+ years together:

• The number of divorces after 20 years of marriage rose from 13% in 1990 to 28% in 2011
• The median age for divorce had increased from 38 years for men and 34 for women in 1971 to 45 years for men and 42 years for women in 2011.

The director of the Australian Institute of Family Studies, Alan Hayes, believes that there are a number of reasons for this change:

 

1. Women, who are more likely to initiate divorce, have an increasing economic independence – and hence a greater capacity to make a choice to leave an unsatisfying relationship;
2. Increased longevity: people are aware of the length of time a relationship can go on for and are evaluating whether they want to spend another 30-40 years tolerating their spouse; and
3. Those with children under 18 years of age seem to be less likely to divorce but once children are leaving home people re-prioritise – something of an “empty nest” syndrome.

The author of the Institute’s report on their research, Ruth Weston, believed that another reason is that divorce no longer carries the stigma that it once did:

“We found a lot of change in attitudes towards divorce. Younger people are more prone to agree with the idea of divorce than older people but right across the board we’re not seeing strong disapproval for divorce.”

But while “death do us part” may no longer be the norm, there is some good news for romantics:

• The number of divorces for shorter marriages fell from 1990 to 2011;
• Around 50% of people in all age groups believe that marriage is not an out-dated institution; and
• The overall number of divorces is decreasing – 48,935 in 2011 down from 55,330 in 2001.

The impact of separation on superannuation

I recently read a report titled “Untying the Knot’ by Suncorp Superannuation which claimed that 86% of divorcees did not consider superannuation in their divorce settlement.

 

I was a little surprised that the figure was that high but not surprised by the sentiment. A lot of the people who come to see me don’t realise that superannuation is included in calculating the assets and liabilities to be divided between the parties and that even though the superannuation interest may have been accumulated by one party going to work the other party has contributed to that fund by being the home-maker or raising the children – activities that allowed the first person to have a family and home but also log long hours at work.

And superannuation can be a very important asset – statistically it is usually the second biggest asset other than the family home, and depending on the size of the mortgage and age of the parties it can sometimes be the biggest asset.

The statistics in the “Untying the Knot” report show how failing to appreciate the impact of separation and divorce on superannuation can have a drastic effect on your retirement age and superannuation savings.

Firstly, let’s look at what the report showed about the impact of divorce on retirement age.

According to the people surveyed the highest percentage of people not separated or divorced nominated 65-69 (29.4%) as their ideal realistic retirement age, while the majority of those who are divorced selected 75 or older (29.9%) – that’s a ten year difference in likely retirement age for those who are divorced or separated.

So, turning to the impact of divorce on superannuation savings, why is there such a difference in estimated retirement ages?

The report referenced figures relating to the average age of divorce to demonstrate the very different financial positions of male and female divorcees, and came up with this disquieting statistic:

The average age of a man at divorce is 45 and he has about $128,000 in superannuation

The average age of a woman at divorce is 42 and she has about $42,000 in superannuation

If that woman is one of the 86% of divorcees who do not consider superannuation in their property division (firstly, that it is an asset and secondly that she may have made an indirect contribution to the fund) than she is likely to be at a significant financial disadvantage come retirement age; if she had considered superannuation during her property settlement negotiations she is far more likely to be in a financial position to retire earlier rather than having to work into her 70s and beyond.

While the report did not focus on this perspective, to my mind there is another reason why those surveyed may have a different view on what their superannuation savings needs are post separation, and that is, that a payment to a spouse or former partner of part of your superannuation fund obviously reduces the amount of superannuation you have to retire with – hence the need to work later in life to rebuild that nest egg.

While these statistics may be true, and you may have no choice when it comes to going through separation or divorce, there are some options available to help you get back on track financially. Firstly, for my part it is about negotiating the property division that will best enable you to get on with your life, and secondly, I can refer you to expert financial planners who can help you with the next stage of your financial future.

Tax and family law

Despite all the lawyer jokes out there - and trust me I've heard them all ... “It was about as even a divorce settlement as you could hope for. Each lawyer got $50,000” – my experience is that nobody benefits from a long Court battle.

However, I can also tell you that an informal property division (for example, where one person keeps living in the house and the other person gets the investment property - without a legal agreement or Court Order) is one of the quickest and simplest ways to ensure that you may each end up paying a lot of money to the government.

You see, the law grants exemptions for stamp duty and rollover relief for capital gains tax on property transfers in circumstances of family law property division. This means that no stamp duty will be payable on the transfer of property between spouses (including de facto spouses) and any CGT applicable to investment property can be paid only when the party receiving the property disposes of it in the future - IF formal arrangements are made about that property division.

 

However, it is not necessary to go to Court for Orders regarding your property division because these savings are available to parties finalising their property division by Consent or Agreement. This means that you can have an amicable and cost effective resolution of your property division and save money on tax.

 

So what kind of savings are we talking about?  One of the most common examples is:

 

A couple transfer their home into the wife’s name and she pays stamp duty of $13,500.   Some years down the track they sell the investment property and they co-sign the contract for sale as they never transferred title of that property to the husband – in an attempt to avoid paying stamp duty. June 30 rolls around and they now each owe $10,000 in capital gains tax.

 

If the parties had entered into a formal agreement the wife could have saved $13,500 in stamp duty and $10,000 in CGT and the husband could have had CGT roll-over relief of $23,500 rather than having to pay $10,000 in CGT.

 

The rules, bring rules, are not always straight forward (and I always recommend that you get expert tax advice as well) but to avoid gifting all that money away contact us to discuss your property division - I might just be able to save you thousands.