Facing a Grey Divorce or Separation?
Facing a divorce is difficult no matter how long you’ve been married, or how old you are. If you’re an older adult separating or divorcing, there are often unique or differently felt issues. Fortunately, these issues are mitigated by the options that can be available, especially with the right expert advice and dispute resolution tools at the ready.
Answers to Your Grey Divorce and Separation Questions
At Doolan Wagner Family Lawyers, some of the most common questions we are asked in concerning inheritances and income splitting are:
Q: I am about to receive a significant inheritance. How is that going to be treated?
The answer will depend on the circumstances of each case.
If, for example, the parties had no other assets other than the inheritance, but the other party has contributed financially and as a homemaker and parent throughout the relationship, it would be open to the Court to make a property settlement in favour of the other party from the inheritance.
On the other hand, if there are ample funds from which a property settlement can be made and one of the parties receives an inheritance, then a recently acquired inheritance would normally be treated as an entitlement of that party alone. Here, the other party cannot be regarded as having contributed significantly to an inheritance received late in the relationship or post-separation except in exceptional cases – such as the care of the testator prior to death or having looked after the inherited property. Even if the inheritance is excluded it will be considered as being available to the party in any property settlement.
Q: We have used income splitting as a legitimate tax minimisation strategy for many years. What happens now that we are separating?
Income splitting, whether via a trust or through a company, is a legitimate means of minimising your family’s collective tax liability. Upon separation, the continuation of an income splitting practice is a decision you and your former partner need to resolve. Most people, for several reasons, would not see this as being a practicable long-term solution. The Court also has a duty to sever all financial ties between parties, which makes Orders regarding an ongoing income splitting arrangement likely problematic. For this reason, it is usual for one (1) party to retain the entity through which income is split and for the other party to relinquish their interests in it.
If a party relinquishes their interest in the entity through which they have historically received income and it is intended that that party no longer receive any funds from the entity, the Court will have regard to that in determining whether a property settlement is just and equitable and also in assessing whether a party has an obligation to pay their former partner spouse maintenance. In determining either of these matters, the Court can have regard to a party’s “true” income that is available to them or their income earning capacity, which may include income that was previously split or distributed to another party. It is important to remember however this is only one (1) consideration in the determination of a just and equitable property settlement and/or a spouse maintenance application, and each matter will need to be determined on the individual circumstances and merits of the case.
We hope you found these answers helpful. There is light at the end of the tunnel. The breakup of a marriage or de-facto relationship can be difficult and emotionally draining, especially after a long-term marriage. However, with considered financial advice, emotional support and by engaging a trusted family lawyer to guide you through the process, you can move onto the next stage of your life with confidence.
If you want to learn more about separations and divorces in later life, visit our website: Grey Divorce – Divorce & Separation in Later Life | Doolan Wagner (familylawyersdw.com.au), for everything you need to know when facing a Grey Separation and Divorce.
Courtesy Doolan Wagner Family Lawyers
These posts are only intended as an overview or comment on current issues that may interest you and are not legal advice. If there are any matters that you would like us to advise you on, then please contact us on (02) 9437 0010.