It is often possible to reach family law property settlements through negotiation, without the need to attend Court. Negotiations can be formally documented through a binding financial agreement or by making an application for consent orders. As a last resort, either party may need to initiate Court proceedings to enable their financial situation to progress towards a resolution and orders can be made regarding the division of the parties’ property possibly by consent or else by the court or an arbitrator in some cases.
No matter how a property settlement is reached, it is important to be aware of the financial impact of the proposed agreement before finalising it.
Lawyers provide legal advice but are not financial advisors although they often are able to flag for you important issues to investigate with an Accountant or Financial Adviser before you commit to any final settlement proposal.
For that reason, Family lawyers sometimes recommend that clients obtain advice from an Accountant or Financial Advisor to ensure a property settlement delivers an optimum financial outcome for the client. This may be helpful if assets are held not by individual parties but by trusts or companies or there is a business asset to be taken into account.
Identifying and classifying assets and liabilities
An Accountant or Financial Advisor can help to properly identify, classify and evaluate the parties’ assets and liabilities, whether these are held jointly or individually. Assets can be held in various ways, whether through a trust, company or shares and it is important that a full portfolio of the asset pool is obtained. Only by presenting a complete picture of the parties’ financial position, might a fair and reasonable property settlement be negotiated.
In some circumstances, certain assets, such as business interests and company shares, should be formally valued.
Recommending tax effective strategies
Understanding the tax implications of a proposed property settlement can have a significant impact on the net result for each party.
The retention, transfer or division of different types of assets can have different stamp duty and tax consequences.
It is useful to have advice on strategies and structures for the division of assets to take advantage of duty concessions and tax exemptions or deferrals that are unique to family law property settlements. This may include recommending that a certain asset be retained or transferred. Depending on the stamp duty and tax consequences applicable to that class of asset, it may be more advantageous to retain one type of asset over another.
Another issue to be considered is whether there is a potential future CGT liability which is an important consideration when negotiating the division of property. Competent advice on transactions concerning companies and trusts is also important.
Advising on superannuation
If a superannuation split forms part of the proposed property division, then you will either end up with more, or less in your superannuation account. This may require a reassessment and restructure of your retirement plans. It may be beneficial to obtain advice to evaluate the net effect of a proposed superannuation split and assess future needs and contributions towards superannuation.
Assessing future needs and planning ahead
A Financial Adviser can help implement strategies on how to get back on your feet, financially, after separation. This may include budgeting advice and money management strategies, recommending appropriate insurance to protect your income, managing and protecting assets, and developing plans to work towards your financial goals.
Estate planning and death benefits
Once a property settlement has been reached and finalised, it might be appropriate to implement an effective estate plan in consideration of your new personal and financial circumstances.
You might consider issues such as what is the most tax-effective way to deal with superannuation entitlements and death benefits and help structure your assets to ensure maximum protection against future family provision claims.
Conclusion
Separating couples are often anxious about their immediate and future financial needs and may seek assistance to achieve a fair and reasonable property settlement.
Your lawyer will assist you and when appropriate recommend you seek additional advice from an accountant or a financial adviser before you finalise your settlement so you can achieve an optimum resolution.
If you or someone you know wants more information or needs help or advice, please contact us on 02 9699 9877 or email [email protected].