By Rolf Howard, Managing Partner, Owen Hodge Lawyers
When confronted with a divorce, it can be challenging, overwhelming and daunting. There are so many issues to tackle including the welfare of children, future financial arrangements for spousal and child support, and the division of assets. While decisions around property, cars or other belongings are often top of mind, there are several other assets that you will need to consider. Here are six assets that are commonly overlooked when people get divorced.
Wills and Trusts
While spouses are consumed with the more immediate issues such as visitation for children, changing residences and dividing personal property, Wills and Trusts often remain unaltered. It is important for both spouses to take their current Will, or any existing documents, to their respective attorneys.
It is also necessary for you to communicate with your soon to be ex-spouse on the question of guardianship for your children. While it is less likely that you and your spouse could become deceased concurrently, the possibility still remains, and you will want to provide for a family member or close friend to care for your children.
Life insurance policies
While you and your spouse may have been each other’s beneficiaries when it comes to life insurance, this no longer legally needs to be maintained. Therefore, if you or your spouse find that securing life insurance policies where each other remains the beneficiary is important, then you will need to specifically make this part of your settlement agreement.
Health and medical benefits
Often both parties have separate health and medical insurance and the children are covered by one or both of these policies. However, it is important to discuss if one spouse will continue to be eligible for benefits through the ex-spouse, and if not, how this spouse will secure insurance.
Also, a divorce does not necessarily assign the responsibility for children’s health care to a particular parent. If one parent cannot afford to provide healthcare for the children, the issue must be discussed and arrangements for the other spouse to provide this type of care, and will most likely need to be included in your settlement agreement. This agreement should be sure to include those areas outside of regular health care insurance such as holistic treatments (acupuncture, chiropractic etc..) orthodontics and mental health services.
Educational costs are an area that is often overlooked, especially if children are receiving a free public education at the time of the divorce. Even under these circumstances there are many additional expenses that should be reviewed and shared including;
- School Supplies (such as uniforms)
- Field Trip/School Travel
- Extra-curricular activities
- Music Lessons (or any other type of paid lesson a child partakes in)
In addition, parents should discuss and make financial arrangements for University or college. The cost of tuition, books and incidentals can be daunting and impossible for one parent to shoulder alone. Yet, this is not an issue that is automatically addressed during the course of divorce. Therefore, it is important that spouses raise the issue and create a positive dialog to ensure their children’s future educational needs are met.
Any debt that the two of you obtained together (home loan, personal loans etc) are a source of contention. It is important that all debts are gathered and presented to the attorneys or the court. These debts include;
- Student loans
- Credit cards
- Personal loans
- Vehicle loans
It is important that determinations are made with regard to the following;
- Date upon which the debt was incurred
- Names on the debt documents
- Balances on the debts
- Contributions made by both spouses to the pay down of the debts
Finally, the last issue that must be contended with is the division of retirement funds and accounts. This area is complicated and requires the use of a professional accountant or financial planner. One of the most used resources is the QDRO process. This is the Qualified Domestic Relations Order. Using this process, a qualified accountant reviews all of the facts, including spousal contributions, ages, socio-economic history and gender. The reviewer then makes a recommendation for the distribution of assets to each spouse and it is sent to the parties and the court for approval. If approval is given the monies will be divided and distributed in accordance with the report. Both parties will then have to set up individual accounts to receive the contribution in their own name.
Superannuation funds are often treated a bit differently. For spouse to access and split their superannuation funds certain factors must be met. These conditions include;
- Being over the preservation age and retiring
- Starting a transition to retirement income stream
- Being over age 60 and ceasing your employment
- Being over the age of 65
However, if you do not meet any of these requirements there are other options available for division of the assets until you do meet the conditions for access. Spouse may;
- Flag their investment until the condition that would allow for access arises
- Divide superannuation in the same manner as any other asset
- Split the benefit, but allow it to remain within the superannuation account
The issues surrounding retirement accounts and superannuation are many and have the potential to be quite complicated. It is imperative that these issues are reviewed and discussed and executed with professionals who specialise in the distribution of the same.
About Rolf Howard
Rolf is Managing Partner of Owen Hodge Lawyers. He has been in the legal practice since 1986 and a partner of Owen Hodge Lawyers since 1992. Rolf focuses on assisting clients to proactively manage legal responsibilities and opportunities to achieve competitive advantage. Rolf concentrates on business planning and formation, directors’ duties, corporate governance, fund raising and business succession. His major interest is to assist business owners and their financial advisers plan and implement strategies to build and exit from successful businesses.