When a couple divorces, it’s easy to assume lawyers should take centre stage for providing advice. However, involving an experienced financial adviser can help protect both sides’ wealth.
Michael Miller, certified financial planner and principal of MLC Advice Canberra, says it’s useful to involve an adviser as early as possible. The right terms of engagement are the first aspect to focus on when working with a couple divorcing. This is because there are often many areas of advice required, such as tax and estate planning.
Once terms are negotiated, a planner can help identify assets and liabilities and establish their current values. Eqeus financial planner Gareth Colgan says the adviser’s main role is in quantifying the property the clients own.
“Property is much broader than real estate; it’s all the assets the client owns, including those held through different legal entities, such as trusts and self-managed super funds,” Colgan says. “We often find clients aren’t fully aware of the breadth, complexities and overall value of their assets.”
He says advisers can help whether the couple resolves the settlement through mediation or chooses to commence formal legal proceedings.
“If the couple has the foresight to start the planning, information collection and asset validation process early, it will save them time later,” he says.
Advisers can help clients understand the tax issues involved in the property settlement. As Colgan says, “There are different capital gains tax implications, depending on when assets were purchased and how long they’ve been held.”
Once assets have been discovered and valued, advisers can assist a client in deciding whether to accept a property settlement offer by projecting the outcome, as well as highlighting other areas of advice required, such as tax and estate planning.
Advisers can also help clients understand how insurance policies should be structured after the property settlement.
One at a time
It’s important to recognise it’s difficult for a planner to advise both parties in a divorce. It’s a good idea to refer one party to another adviser.
“It’s difficult to provide advice to one side without breaching your obligations to the other,” Miller says. “An adviser faced with this scenario should carefully consider how to respond to requests for advice and information.”
Advisers are always valuable
Cristina Huesch, a family lawyer with Alliance Family Law, says there’s always a role for advisers in a divorce.
“The advice they provide assists clients in structuring a property settlement; that is, [determining] the best mix of assets, suitable to the client’s goals,” Huesch says. “Asset classes the client should seek to retain, any impact on spouse maintenance entitlements and eligibility for pensions are important family law considerations.”
Divorces are always difficult. But involving an adviser can help make the best of a bad situation, at least in terms of the split of assets.