Going through a divorce is extremely tough. If you’re in this situation, you’ll be dealing with the emotional fallout from a separation, while also trying to wade through the mountain of paperwork that comes with it.
Unsurprisingly, financial concerns are one of the biggest stressors that people can have in the aftermath of a divorce. After all, we’ve all heard horror stories of one party losing out significantly due to the absence of a prenuptial agreement. Superannuation is a key asset in any divorce and critical for your long-term financial security, so it’s important to understand exactly what will happen to it. Here, we demystify what you can expect.
How does the law view superannuation after a divorce?
In the eyes of the law, superannuation is treated like another item of property, similar to anything else you own. This definition is important when it comes to divorce, because it means that, just like your savings or a property, a court can order your super to be divided between both partners. This is true following the end of both marriages and de facto relationships.
What are the options for dealing with superannuation during a divorce in Australia?
Confirmed by a divorce lawyer, generally speaking, you have three options when it comes to superannuation following a divorce.
- Firstly, you can split the super. This could be a decision you make with your ex-partner, or something that is ordered by a court when there is a disagreement. If you do this, it doesn’t mean the super is liquidated into cash. While the value is divided between both parties, and a given amount is transferred to your partner’s account, it is still locked away in a superannuation fund until one of the conditions of release is met, such as reaching your preservation age.
- Another option involves taking into account the value of your super while leaving it untouched – you can then adjust the division of other more liquid assets like cash or property to compensate.
- The final, and least commonly used option is to delay making a decision on what happens to your super until you meet one of the conditions for its release, such as retirement. This is called a flagging agreement, because the super fund will put a flag on the account, and it means that no money can be paid out until this flag is removed.
Such an arrangement might be useful if one of you is close to your preservation age, as this means that no money can be withdrawn from the account until you have come to an agreement as to what will happen to the funds. It can also make sense to take this approach if you and/or your ex-spouse’s super is invested in a fund type where it’s hard to calculate its exact value, such as a defined benefit account.
So, what can you do?
Fully understanding the rules when it comes to superannuation and divorce is crucial to ensuring you reach a fair settlement, and that there are no nasty surprises along the way. Given the complexity of the law surrounding super, the importance of getting it right, and the already stressful situation of a divorce, it’s vital that you have experienced family law professionals on your side.
At Testart Family Lawyers, we have the experience and sensitivity needed to work with you at this difficult time to achieve the best possible result for your superannuation.To find out more, get in touch with our team today.