Going through a divorce?
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Going through a divorce? Here's some invaluable advice.
“Did you know John and Kate are getting a divorce?”
Chances are over the last few years post covid, you’ve heard this type of question asked in your friendship group.
The latest divorce figures released by the ABS revealed there were 56,244 divorces granted in 2021, up 13.6 per cent from the previous year.¹ That’s at a level not seen since 2011 and 2012, when the world was recovering from the aftermath of the global financial crisis.
While the spike in divorces cannot be solely attributed to the global pandemic, you could easily surmise that a high number of the nearly 200,000 people who filed for divorce across Australia during that time – the highest number in a decade – did so as a result of their relationship succumbing to COVID-related stresses.²
If you’re one of those people going through a divorce, or know someone who is, it can be a very confronting and confusing time. The settlement process can be very difficult.
But it can be made easier with the right level of professional support and advice, as we uncover with Tribeca’s CEO Ryan Watson together with Emily O’Brien, Senior Associate from Coote Family Lawyers and Shai Sommer, Senior Associate and Accredited Family Law Specialist from national law firm Lander & Rogers.
Have open and honest conversations
One of the hardest aspects about going through a divorce is talking about it. Especially when there are children involved. It’s often a volatile mix when emotions are running high and finances are on the line.
Being open and honest with your advisor team gives you the best chance of achieving an outcome that positions you for the now and your new future.
Ryan says having these conversations is essential.
“What does the family situation now look like? Are there childcare arrangements that need to be considered? How important is the family home; financially and emotionally? Will your income be affected? How will you manage your finances if that’s something you’ve never been in control of?
These are pretty challenging questions to ask, but addressed openly and sensitively with your financial advisor they can be the first step to moving forward positively and with surety.”
The same approach is critical with your legal support, as Shai explains:
“Going through a separation is difficult, so trust is really important. I often tell my clients that I will fight for them when, and importantly if necessary, and that I will let them know when there’s something to worry about. Often what clients perceive to be a big issue may not be one at all.
It’s about honesty. I’m here to tell my clients what they need to hear, not necessarily what they want to hear. My role is to help them navigate through the separation, and sometimes that means dealing with emotions and different hurdles. It is about finding solutions to allow the client to move on in a dignified way. That can only happen with open communication and transparency.”
Although these conversations are not always comfortable, Emily believes they are often the key to building confidence in the lawyer client relationship.
“Clients shouldn’t be afraid to ask any question and challenge their advisor, whether that’s a lawyer, financial planner or accountant. What this does is give people a greater sense of control over the process. It helps them understand why we’re approaching things from a certain way; taking this path over another. It enables them to make fully informed decisions.
At the end of the day we can only give advice. It’s up to the client to make the final decision.”
Plan for today and tomorrow
When going through a settlement, it’s very easy to be consumed by the now. How will the finances be divvied up such as property, shares and investments? And for a family, how will the parental responsibilities and entitlements be shared? If it’s an acrimonious divorce, both elements can become heatedly contested.
Short-term thinking can have long-term consequences, and not always positive ones. This is when the collaboration between lawyer and financial advisor is so important.
“The reality is that no one expert can have the solution to every problem. From my perspective, I’m very clear on where my expertise starts and where it finishes. I can tell my client what their family law entitlements might be, but I can’t advise them how this may impact their finances moving forward. It’s important to connect clients with the right experts (like Tribeca)” says Shai.
It’s this focus and care for the needs of the client both during and long after settlement that drives Tribeca.
“There’s many considerations that need to be factored in,” explains Ryan.
“It’s not just looking at what their future looks like for the next 12 months; it’s for the next 12 years and beyond. We ask the client if they could start living their Good Life from today, what would that look like? Our 10-3-Now goal setting exercise is one of the practical ways we can help shape this, resulting in a clear roadmap to achieving their short and long-term goals. We know taking this holistic view is not always easy for the client during such a tumultuous time, but the benefits can have a lasting impact.
Obviously there’s a lot to consider, like what are the non-negotiables? Is it still keeping the family home regardless of if they’re worse off financially in the short-term? Or is it too traumatic to stay in, and the focus is to start afresh in a new suburb or new state closer to family? How will they balance their professional and personal life with sharing the kids and what does that mean income wise if they have to reduce work hours? What about new relationships and protecting assets in the future?
Answering these questions goes beyond just the financial implications of settlement. It factors in the life implications of settlement. At Tribeca we talk about the 5 Ls: Live (lifestyle now and in ten years time); Love (important relationships and adding value to them); Learn (particular passions or trying new things); Laugh (creating happiness and laughter); Legacy (contributing or giving back to society and loved ones).
Again, adopting this holistic view can allow both the client and lawyer to be decisive and confident in their approach and decisions.”
Emily agrees that having the lens of a financial advisor can be invaluable in best accommodating the client’s needs and objectives for the now and future.
“As this can be a very uncomfortable process, the client is often looking for immediate change, without contemplating how that might impact them long-term. Addressing early what is important to them for their financial future can only benefit their settlement, like do they need to retain an income producing asset and what are the consequences of that for capital gains tax? Canvassing these issues can set up that structure to meet their overall needs rather than having those discussions at the tail end, when it’s either too late as the settlement has been agreed upon, or you need to shift the goalposts so dramatically that it may upset the settlement.”
Trust your team of advisors
You don’t want to go through the settlement process alone. And you don’t want your advice team to do the same.
This is where trust and confidence in your team is paramount, as the benefits flowing from a team of experts all working together to achieve the best outcome for you financially and holistically are invaluable.
This can be behind the scenes or front and centre.
“It depends on the situation,” says Shai.
“Some clients bring their financial advisor to mediations, court hearings or conferences generally so that they can participate in those key discussions. Others prefer to keep their financial advisors in the background. Each client is different and has different needs. Ultimately it is about the client making an informed decision.
One example that springs to mind is a client I acted for some years ago who told me that they wanted to keep the family home for sentimental reasons. I encouraged him to seek financial planning advice before making a final decision about this issue, even though he had already obtained pre-approval from his preferred bank. It was important for me to ensure that whatever decision the client made, it was an informed one. Ultimately, following advice from his financial planner, the client decided not to keep the home as he would have struggled to service what would have been a significant mortgage. Armed with the financial planning advice, the client was in a position to make a commercial decision about his finances to set himself up moving forward.”
Emily also shares similar stories of collaboration.
“We had a client who reached retirement age and her financial literacy was quite basic. She had not been involved in the management of the finances during what was a very long relationship. Her asset pool was very complex, so we worked with her financial advisor to cater for her needs for today as well as the future. There was an array of issues which needed to be considered. Having this independent expert financial advisor assisted our client greatly.
What it also shows are the many layers of divorce settlements. It is not just about the financial entitlement. For mature clients, it can be more about building and restoring their confidence and self-esteem through educating them on that financial literacy.”
Empowering clients to take control of their financial world is very much a priority for Tribeca, particularly with the rise of the ‘grey divorce’ – the term coined for older adults (typically 50+) going through a divorce. In fact figures released by the Australian Institute of Family Studies³ show more than one-quarter of the 56,244 divorces granted in 2021 involved couples who were married for 20 years or more, up from about one in five in the 1980s and 1990s.
“More and more we’re being brought in as a professional witness for settlement cases, where our financial modelling for a client is used to support the entitlement claim,” says Ryan.
“It could be that the client hasn’t worked for 20 years as they’ve focused on being the primary care giver, so we need to show a clear path forward for what they need to survive as well as provide for the kids. Through sitting down with the client and mapping out what their Good Life looks like, we can model this picture as compelling evidence to support the legal team’s claim. And offer them comfort knowing that they can look to their future with a sense of security and freedom.
This is the true value of advice, when you have a committed team of like-minded professionals working as one to achieve the best outcome for the client.”
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