Divorce, property settlements and the GFC
Couples have been forced to re-think divorce and its procedures due to the Global Financial Crisis (GFC).
Effects of Financial Stress
It seems that the GFC is temporarily saving marriages, at least for the potential divorcees that have sought financial advice. At a time where shares and property values have hit rock bottom, marriages that have done the same are waiting out the GFC. It is undeniable that the GFC is also a major cause of these pending divorces due to the financial pressures and anxiety that put such a large strain on relationships.
Many couples have chosen to go through mediation and avoided property settlement court cases that can easily cost tens of thousands of dollars. As such, many settlements have been placed on hold due to unavailable funds.
With the growth of people exploring mediation options there has also been a rise in the value of a financial adviser. Everyday people along with lawyers and judges have become reliant on financial advisers as they negotiate tricky property settlements as part of the divorce process.
When a partner tries to keep the house, the role of valuations becomes more important as the homeowners seek the lowest possible value for the property. This is so they’ll have to pay less in an already capital tight situation to buy out the other partner. Shares, property and superannuation have all had to be revaluated by lawyers and clients due to the volatility of the market.
The collapse of tax schemes such as Great Southern and Timbercorp have not only caused their members to lose almost all of their investments, but have put such large amounts of financial pressure onto people that it has impacted on their marriages and subsequently led to many divorces. Job losses have also had the same effect on relationships and have affected property settlements.
Divorce isn’t something you plan for and getting the right advice is important. Reduced lifestyles can be difficult to come to terms with and plenty of people aren’t aware that settlements can often take two years or more, during which time there can be a drastic change in property and share values. For this reason valuations are now obtained as close to the settlement date as possible. This is opposite to the previous practice of obtaining them at the beginning of the divorce process.
The GFC has made it increasingly difficult for judges to assess and predict future needs of the divorcing couple. This is especially true in cases where companies issue shares to employees, which have now drastically dived in price. Since the share market is so erratic, especially during this time, it is very hard to forecast potential financial positions of the divorcees.
When it comes to property settlement for a short marriage, more emphasis is put on contributions made during the marriage for the other person. For this reason many arguments and exaggerations can arise. Here, the return isn’t likely to be 50/50 but will depend on the percentage of contribution instead.
The scenario is different for property settlement after a long term marriage. Property is more likely to be divided evenly. For example, a wife who has not worked will often get 60 per cent of the assets if her future earnings will not be as high as those of her husband. The lower or non income person will usually get to keep the house, especially if children are involved.
If you would like to find out more about the property settlement process please click here to submit an online enquiry or contact The Quinn Group on 1300 QUINNS (784 667).