Financial advisor, Helen Baker shares common divorce myths that could end up costing you a small (or not so small!) fortune.
How many people plan to get divorced? None, of course.
Yet in 2018 alone, 49, 404 divorces were granted across Australia. Singapore on the other hand saw more couples divorced in 2019 as compared to 2018, with a total of 7,623 marriages having ended in divorce or annulment. The annual average number for marital dissolutions between 2015 and 2019 stands at 7,536, which is slightly higher as compared to 7,402 in the preceding five-year period (from 2010-2014).
So it’s a real situation for many people, with all too real issues to address.
Surprisingly, there are many widely perpetuated myths around divorce – ones which can needlessly cost you tens, even hundreds, of thousands of dollars!
So, let’s sort fact from fiction on 10 of the most common divorce myths.
Seek financial advice as well as legal advice during a divorce. Image source: iStock.
Myth 1: Your lawyer has all the advice you need
Lawyers can only provide legal advice. Getting through a divorce and then re-establishing yourself takes a team of advisers – legal, financial and emotional.
Sadly, many people go through a divorce looking solely at the legals, only to find themselves burned out and financially crippled.
Think longer term about your health and wealth, not just the legalities.
Myth 2: Splitting everything 50/50 is fair
A fair share of marital assets isn’t necessarily a 50/50 split. How the asset pool is divided depends on:
- The asset pool itself (property, cash, superannuation, investments, household contents, vehicles etc.)
- Your respective contributions (e.g. inheritances, assets owned prior to the marriage, incomes)
- Both of your future needs – Can you work? Were one of you a stay-at-home parent? How is your health?
- The settlement being fair and equitable – (e.g. you can’t take all the cash and leave someone young all the superannuation, because they can’t access it until retirement age.)
When it comes to tackling common divorce myths, splitting assets down the middle often isn’t equitable. Image source: iStock.
Myth 3: You can split everything down the middle
Not every asset has the same value in practice, so it may not be in your best interest to split everything down the middle.
For instance, an investment property worth $1 million costs more than the family home of the same value, because it will attract Capital Gains Tax.
Consider how each asset works before determining how to divide them.
Myth 4: Your super is yours
Many people don’t realise that superannuation is part of the marital asset pool, just like all the other assets.
As such, someone who may have worked less and with lower super contributions – such as a stay-at-home parent – may be entitled to a portion of their ex’s super.
Myth 5: “My friend had an easy divorce, so I will too”
Just as every relationship is different, so is every divorce.
Everything from what assets you have, how long you were married, how money is invested and how you will fare in future play a role in determining a settlement.
It’s important to get the settlement right for your particular circumstances: because a mistake will cost big money!
Divorces are not easy and are different for everyone. Image source: iStock.
Myth 6: “I just want the house”
Properties, especially the family home, often have sentimental value, meaning we can place an overreliance on them.
However, properties need upkeep. Depending on whether you are working and what your future looks like, you may not have enough for your retirement, or be able to afford to keep the house on your own.
So, you’re forced to sell it anyway – and then what are you left with?
Myth 7: “The judge will see in my favour”
Don’t underestimate the amount of time – and money – it takes to go through the courts.
The court system is highly congested – you could wait years to get through, with no guarantee that the court will see things your way.
Stick to facts (instead of vengeance) and try to reach a settlement without going to court. Afterall, you may be better off making that money gap up by having control over your own money, investing and protecting your mental health.
Aim to reach a settlement before going to court. Image source: iStock.
Myth 8: “I should just take cash”
Cash is king and a great way to start – so long as you don’t blow it bit by bit.
And particularly with record low interest rates, cash is not going to increase in value as quickly as other assets. Again, not all assets are equal.
Myth 9: Your ex will stay the same
Assuming that your ex has/will keep you (on behalf of the kids) as the beneficiary of their will, superannuation and insurances, is a big mistake.
You have no control over these elements, and your ex can easily change them to leave you, and your kids, out in the cold.
Myth 10: Your ex’s debts are their own
Sorry to burst your bubble, but just like assets, debts also form part of the marital asset pool – for which you are both liable.
It’s for this reason you should always take an active interest in joint finances, and not leave financial decisions solely up to your partner.
Note: this is general advice only, and you should seek advice specific to your circumstances.
Helen Baker is a Australian licenced financial adviser and author of On Your Own Two Feet: Steady Steps to Women’s Financial Independence and On Your Own Two Feet – Divorce. (Proceeds from book sales are donated to charities supporting disadvantaged women).
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