Dollars & Sense: Can I open a secret bank account if I plan to leave my spouse
Q: If I plan to leave my husband, can I open a secret bank account?
Welcome to our new Dollars & Sense column. The aim is to connect you with qualified experts who can share their views on your money and investing quandaries. While in no way is it formal financial advice, it is a way to stress test your decision making, to find out potential financial implications before you make your choice, and to discover more about structuring your affairs so that your money works harder for you. We invite you to submit your questions to dollarsandsense@theaustralian.com.au.
If I plan to leave my husband, can I open a secret bank account?
Sarah, Melbourne
The interesting word here is “secret”. Is it “secret” because he doesn’t know you plan to leave, and you want to seek advice before deciding whether you will stay or leave? Or “secret” because your financials are monitored? Or “secret” because you have no access to your own funds at all and you want to squirrel something away?
I always talk about Five Foundations, the first of those being an emergency fund (the amount may also include a “get out” fund). I strongly encourage everyone to have access to their own bank account as a part of being financially independent. In a healthy, happy relationship, these would obviously be visible to both parties and strategically placed – that is, maybe an offset account to reduce mortgage interest while allowing access to those funds.
When a relationship breaks down one of the next steps is to prepare for a financial settlement. For anyone leaving a relationship, it is important to have funds for pre-settlement financial advice and legal advice. Pre-settlement financial advice is key to walking away with the right assets, a plan for your cash flow and security around your long-term financial future, before you sign on the dotted line. In some cases, it may also require funds for renting elsewhere, and months of provision to maintain independence. Depending on the situation, the latter may take priority over the former.
The first part of defining a financial settlement is determining the asset pool. All assets, including secret bank accounts, will form part of the asset pool and will become visible.
Depending on the above will determine how much you need, when and which steps you take first.
How can I boost my super balance?
I own a small unit in Brisbane and I have about $220,000 in super but I’m worried this won’t be enough for me to be able to retire. (I’m 58.) What can I do to boost my super balance?
Denise, Brisbane
The current age pension is approximately $30,000 for a single person and, according to ASFA, the spend for a single person is about $53,000 a year without meeting rent or debt. That is a gap of $23,000 a year. Thankfully, you own your own unit.
You and I are supposed to live somewhere between 87 and 92, so we certainly want to build super as much as we can to give us choice in the future, the best retirement we can, with lifestyle on the way and extra in case there are future cost-of-living/greed crises.
If we assume you continue to work until the age pension age of 67, and assuming you are still working, you have almost 10 years to bolster your superannuation to be as big as it can be.
There are some wonderful strategies that assist in building superannuation. The luxury of superannuation is that it is one of the most tax-effective structures, we have with the tax rate 15 per cent as opposed to most people’s marginal tax rates, generally double that and more.
My favourite piece of legislation is the “catch-up legislation”, which allows those with balances of less than $500,000 as at June 30 the prior year to go back up to five years, and capture the gap between what the annual superannuation cap was that year, and their total concessional contributions.
Concessional contributions include employer contributions, salary sacrifice amounts, and personal deductible contributions. Last year the cap was $30,000.
By using this strategy, this could reduce your tax while building your superannuation. It may not be appropriate to use the gap in the cap all at once. It will depend on your earnings, your marginal tax rate, your need for cash flow and various other factors. But with a balance of $220,000 you can seek advice about what are the appropriate amounts to do each year and hopefully you can get on, and stay on, your own two feet.
Helen Baker is a licensed Australian financial adviser and author of Money For Life: How to build financial security from firm foundations.
The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all relevant circumstances. Before relying on any of the information, please ensure that you consider the appropriateness of the information provided with regard to your objectives, financial situation and needs, and seek independent professional advice.
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