Ten divorce money myths that make marriage breakups harder

Myths and mistruths around money are common when couples split. Here’s how to protect your assets and keep things financially amicable.

Plenty of financial pain flows from the almost 50,000 divorces granted in Australia each year.

Amid the stress and sadness is often confusion around what impact a separation will have on a money and other assets.

Author and financial adviser Helen Baker says there are many deeply-held myths around divorce that may cost people tens – or even hundreds – of thousands of dollars.

Let’s break up a few of them.

MYTH 1: MY SUPER IS MINE TO KEEP

Baker says many people don’t realise that superannuation is part of the marital asset pool just like other assets.

“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,” she says.

MYTH 2: I’M FREE OF MY EX’S DEBTS

“Sorry to burst your bubble, but just like assets, debts also form part of the marital asset pool – for which you are both liable,” says Baker.

“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.”

Financial adviser Helen Baker says believing divorce money myths can be very costly.

MYTH 3: JUST LEAVE ME THE HOME

Baker says people often put a sentimental value on keeping the family home.

“However, properties need upkeep,” she says.

“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 4: A 50-50 ASSET SPLIT IS BEST

Not every similar asset has the same value.

For example, an investment property may be less valuable than a family home even if both cost the same, because selling the investment attracts capital gains tax while family homes are tax-free.

“Consider how each asset works before determining how to divide them,” Baker says.

MYTH 5: THE JUDGE WILL BACK ME

“Don’t underestimate the amount of time – and money – it takes to go through the courts,” Baker says.

“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 agree a settlement without going to court.”

Some assets are more valuable than others in a marriage break-up.

MYTH 6: IT’S AN AMICABLE SPLIT WE CAN SORT OURSELVES

If two people cant agree to be married, they’re unlikely to agree on financial issues in a divorce.

Minnik Chartered Accountants director Leah Oliver says paying professionals to fast-track proceedings can enable people to move forward without long-term financial pain.

MYTH 7: THEY’RE CHASING CHILD SUPPORT BUT WE CAN STILL RECONCILE

“If there were no obvious red flags in the lead up to this event, this one’s a traffic stopper,” Oliver says.

“Get your financial affairs in order – right now.”

MYTH 8: KEEPING THE KIDS GIVES ME THE POWER

“Decisions that involve the children by one parent require consent by the other parent,” Oliver says.

“It is a grand misconception that whoever has majority care of the children is entitled to sole decision making and avoidance of financial responsibilities.”

MYTH 9: I WILL LOSE MY INHERITANCE

Money inherited from a relative doesn’t necessary get split in half between warring partners.

Oliver says each side’s contribution to the relationship is considered in a divorce.

“Who’s entitled to what shouldn’t be assumed by either party until financial disclosure has taken place and legal advice obtained,” she says.

MYTH 10: IF I KEEP THE PEACE I’LL BE OK

Oliver says this may be so in rare cases, but then the other person’s life changes, “most often seen where they enter a new relationship”.

“Take care of yourself, don’t ever just go with the flow,” she says.

@keanemoney