There was an article in the Sunday Mail a few weeks ago which identified the suburbs in Queensland where it is cheaper to now buy a property and service a mortgage than rent.
That article highlighted for me the importance of each of my clients prioritising a financial plan as an essential component of the property settlement process. So many talk about financial advice being too expensive or beyond reach but, in many instances, the loss that flows from not seeking specialist advice dictates that many can’t afford not to seek advice.
I routinely hear comments like:
“I’ll have to rent now, there is no way I’ll be able to afford to buy”
“I’ll finance a new vehicle rather than keep the vehicle I have”
“I don’t want to receive my entitlement in a superannuation split, I want it in cash”
“I need to stay in our home, it’s the most financially stable thing to do”
“I want to keep cash/our home rather than our investment/commercial property”
“If I can’t afford the property in 12 months, then I’ll just sell it then”.
In some instances, the comments are made accurately but often they are not and these assumptions can lead to decisions which may well send you down a path which is not as financially optimal as it could be.
There are a few fundamental truths in a post-property settlement world, and in life.
The first is that we need to structure our everyday on the basis that more money is coming in than going out. This might mean, given the article referred to above, that you are best securing finance and purchasing than renting. Obviously this assumes that we can work with a financier to secure that finance which is not always easy, but worth exploring. Key to this consideration is the need to take time to plot out your income and expenses and then monitor cash flow – something which might be brand new post-separation, but enormously empowering.
The value of your principal place of residence, or home, needs to be proportionate to your total net wealth and income. You can’t put a dollar figure on the emotional stability that can accompany staying at home, but you create a potential burden for your future self in remaining in a home where the cost of that home will only lead to financial struggle and worry.
There is significantly greater value in retaining a vehicle, plant, furniture and other effects than replacing them as part of the property settlement. These items are valued at market value for the purpose of negotiations not replacement value, which can be dramatically different.
For some, the retention of superannuation and obtaining a further superannuation split might ultimately be worth significantly more to you than cash which will remain in the bank. A lot depends upon the return available, your age and your long term plan – all topics for your trusted financial adviser. Similarly, your financial future may be more secure by your retention of a commercial or investment property rather than a lifestyle asset or home. Again, so much depends upon your personal circumstances.
I’ve extracted the comment above “If I can’t afford the property in 12 months, then I’ll just sell it then” because I hear it quite often. The problem with this approach is that post a property settlement the loss consequent in the sale of the property (eg, commission, etc) and importantly any capital gains tax which is calculated from the initial purchase for properties to which that tax applies, is then borne solely by you – and not shared as part of the global division of property. Accordingly, it’s really important to take advice and make that decision as part of the property settlement process.
For so many, separation involves reconciling feelings of loss and depletion, but there is genuinely so much to be gained from empowering yourself around your financial future, designing that future and then setting the specific, measurable and attainable goals that allow you to achieve that vision.
The team at Best Wilson Buckley really enjoy working with our local financial advisers around designing the most optimal outcome in the context of your legal entitlement, and then pursuing it through a negotiation process. Contact us for a chat about how to ensure that your outcome is legally, and financially, sound.
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