In Money on Monday 1st Apr, 2019

Your home and divorce: How to handle your biggest asset in a relationship split

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Divorce often results in the sale of your joint residence, but if you do want to keep your home, your bank most likely has options that will support that.

When we gaze at our soon-to-be partner, about to exchange our vows, the last thing in our minds is that we would ever separate. Yet that’s the tough reality for many Stars at 60 readers.

Divorce rates for men and women aged 60-plus nearly doubled between 1981 and 2016, with approximately 9 men out of every 1,000 in the age group divorcing in 2016 and 6 women doing the same.

The end of a relationship, especially one that spanned decades, can spark all sorts of feelings – grief, fear and even anger. If you’re one of the 60-pluses who’ve recently separated or worry that your partnership could be heading in that direction, you may be feeling alone and vulnerable after finding yourself single in later life.

One of your first thoughts will no doubt be about your family home – whether to leave or stay, sell or keep.

Fortunately, just as there are more resources than ever before to help you through the emotional upheaval of divorce, the financial advice and assistance available to newly single, or about-to-be-single, men and women is far more plentiful than it used to be.

We’ve gathered expert advice and key resources to help you deal with the big property-related divorce issues.

Your vital first move

The decision on whether to stay in the family home or leave can be a difficult one. That’s because even though it’s the biggest asset most separating couples own and so its value can make or break your post-divorce financial situation, it can also carry emotional bonds such as memories of the good times you had in that home.

Difficult though it can be, it’s important to put those emotions to one side and seek legal advice early about your property early in the piece. That’s the case even if your separation is amicable; now is the time to focus on what’s best for you and your future.

Carly Middleton, an accredited family law specialist and partner at law firm Barkus Doolan,  says it’s vital that you don’t commit to selling a property or sign any documents regarding the property without having a full understanding of the long-term consequences.

“The key is to not do anything rash until you’ve got the proper advice from somebody who’s knowledgeable in the field,” she says.

Middleton says a common misunderstanding is that the way the home is owned – whether it’s as joint tenants, tenants in common or held in just one person’s name – can affect a property settlement. The truth is that the legal nature of the ownership won’t have an impact.

“It will form part of what’s called in Family Court proceedings the balance sheet for the matrimonial assets,” she explains. “So, regardless of whose name it’s in, that property will be included in the schedule of assets and liabilities to be divided between the parties.”

Another common misconception is that if one person in the marriage leaves the family home, they automatically hand over their rights to the property to the other person.

“It doesn’t mean you’re abandoning the home, and it doesn’t mean you have any less of an entitlement to the property than the person who remains living in the property,” Middleton says.

Of course, if domestic violence is involved or your personal safety is at risk, it’s vital that you leave immediately and sort out the legal issues later. In such circumstances, you can seek urgent assistance from support services in your state or territory or from national organisations. The White Ribbon charity has a helpful list of contact details for counselling and support services available to people in domestic violence situations.

Your future home

Depending on how the Family Court may direct the division of your assets, there could be one of a few common outcomes for your home; you buy out your partner, you both sell the property, you both keep the property for a period of time or you agree that one partner should keep the property.

Westpac has prepared an easy-to-read, downloadable guide on what can happen in each of these circumstances (and what steps to take if you have to sell your home).

If you and your former partner agree that you will buy them out, you may need to start a new mortgage. Or, if you also own an investment property, you might be able to agree an asset swap.

If you and your former partner decide to sell your shared home but can’t agree on how to split the sale proceeds, the Family Court will be forced to decide the division of the funds.

It’s important, however, that you and your ex agree on the terms of the sale and, if possible, are both involved in choosing a real estate agent and overseeing the sale process. Westpac has worked with OpenAgent.com.au to develop a downloadable questionnaire for you both to use when you select your agent to ensure you’re both on the same page when it comes to what you expect from the sale.

You may, however, agree to keep the property with one person living in it for an agreed period of time, such as while a child finishes school. In this case, it’s likely you’ll need to come to an agreement on how mortgage payments will be covered, or perhaps establish a rental agreement for the person remaining in the home. Ideally, this should be sorted out using legal advice as part of your separation agreement or Family Court decision.

Should your partner decide to buy you out of the home, establishing the property’s value can be another tricky point. Again, it’s advisable to seek the advice of multiple real estate agents, using the Westpac form to ensure you’re both asking agents the same questions regarding value.

Coping with higher costs

It’s likely, however, that an agreement on the family home won’t happen immediately. In the meantime, the cost of running two households can come as a shock, particularly if money was tight when you and your partner were living as a couple. If there’s a mortgage on the family home, repayments still have to be met, and if one person moves out of the family home, they will likely have to pay rent on another property too.

Luckily, Middleton says lenders are familiar with the financial stresses a marriage breakdown can create.

“In the early stages of separation, with the consent of both parties, banks will often agree to vary the terms of a mortgage to free up cash flow, so both parties are able to continue meeting their obligations,” she notes.

Rachael Scharrer, the founder of Divorce Answered, a site that gathers the many pieces of information and services you may need in the event of a divorce, agrees that getting in contact with your bank should be one of your first priorities in a separation situation.

“The bank doesn’t know that you’re separating unless you tell them, so it’s a good opportunity to put in some safeguards to protect you financially,” she says. “Start the conversation [because] the bank has a lot of options at its discretion to help.”

For example, Westpac has introduced three options that will lower its customers’ mortgage repayments while they grapple with separation and divorce; a ‘mortgage repayment pause’ available if you’re ahead on your scheduled repayments, payment reductions of 50 percent for up to six months, and the possibility of switching your loan from principal and interest to interest-only.

[Link to appropriate Westpac site Reduce your Home Loan Repayments pages when live]

Of course, these options only suit certain circumstances, so it’s best to visit a Westpac branch or call the bank on 132 558 to check if they’re right for you.

When speaking to your bank, Scharrer also suggests requesting dual-signatory on all joint accounts – this means that transactions can only be made on the account when the signature of both account-holders are present – as well as opening an individual account if there you haven’t got one already.

“Number one is securing your money,” she says. “The next step is to contact Centrelink and get some advice, particularly if you’re experiencing financial hardship.”

Centrelink’s Financial Information Service can help you map out your financial future, as well as explore your eligibility for income support payments. If you’re coming up to retirement age, the FIS can help with Age Pension planning as well.

What next?

Looking at your future finances and making big decisions about your home can feel overwhelming. If you’re finding everything a bit daunting, it’s important to take things one  at a time.

The Australian Securities and Investments Commission (ASIC) has a handy guide to what steps you need to take in the event of a separation and divorce, along with a number of useful links to family law resources.

But your first priority should be to protect your legal rights.

The Legal Aid office in your state or territory can provide information and, depending on your circumstances, may be able to help with legal advice. Or you can get in touch with the law society in your state and ask for a referral to a family law practitioner.

Your lawyer will advise you on your options, make sure your rights are protected and negotiate the best outcome possible on your behalf.

And remember, even though the process can be drawn out and painful, eventually it comes to an end. There is life after divorce!

Things to know: The information in this publication is general information and factual only. It does not constitute any recommendation or financial product advice. It is an overview only and it should not be considered a comprehensive statement on any matter or relied upon as such. You should consider obtaining your own independent professional advice. © Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.

Have you been through a separation or divorce in recent years? How did you address the issue of your joint home?

Important information: The information provided on this website is of a general nature and for information purposes only. It does not take into account your objectives, financial situation or needs. It is not financial product advice and must not be relied upon as such. Before making any financial decision you should determine whether the information is appropriate in terms of your particular circumstances and seek advice from an independent licensed financial services professional.

Westpac

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