While the overall divorce rate in Australia is declining, there is an upward trend in divorce in couples over 50. Ben and Heather talk about this phenomenon on this podcast and some of the unique complications that arise when calling quits on a long term relationship.
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Here are links to some previous podcasts that might be useful:
Getting a Fair Property Settlement
Divorce and the Family Business
Top Six Questions on Property Settlement
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Benjamin Bryant: Hello Coffs Coast and beyond. Benjamin Bryant from Bryant McKinnon Lawyers here and as usual, I’m your host for today’s show. In this episode, we talk about what’s becoming known as Silver Separation or Grey Divorce. And here’s an interesting statistic. While the overall divorce rate in Australia is declining, it turns out there is an upward trend in divorce in couples over 50.
Today I’m joined by my partner and accredited family law specialist Heather McKinnon to talk about this phenomenon and some of the unique complications when you call quits on a long-term relationship later in life.
Before diving into the show, a reminder to please share this podcast with any family and friends starting-out on the rather scary journey of separation. And this particular episode will be especially valuable for anyone over 50 thinking about ending a long-term relationship. Whoever you are and whatever stage you are at in the process of separation, our library of over 50 episodes provides answers to help you feel less fearful and make more informed decisions.
And now, on with the show.
Benjamin Bryant: Thanks for joining me, Heather. How are you today?
Heather McKinnon: Really well. I’ve had a four-day break, so I’m fresh.
Benjamin Bryant: Excellent. That’s great to hear. Well you’ll be fresh enough to get straight into it. Let’s go.
Benjamin Bryant: The national statistics are showing that more Australians over 50 are choosing to leave long-term relationships. Heather, is this a trend that you’ve observed locally?
Heather McKinnon: Absolutely. I mean, given my age and the fact that I’ve been in the community here for 40 years, you get a real sense of change over time. And if you look at my particular client group, the bulk of them are over 50.
Benjamin Bryant: And do you have a sense as to why it is – why divorce later in life is on the rise?
Heather McKinnon: You know me, I love reading sociology. and I think the increase in life expectancy has got to be up there as one of the factors. If I look back to my grandparents’ generation, my Pop worked for 50 years, retired at 68 or something, and basically then you might have had five years of retirement. Most people were out by early 70s. Now we’re living… most of us will live well into our 80s and 90s. And for my generation who were born after the war, the accumulation of capital wealth at the time you inherit from your parents means you have choices. Australia is a very wealthy country, and most people over 50 can now look at the dollars and say, right, there’s no longer a need to stay within the marriage because I’ve got enough capital if I do want to go out on my own. So I think those things are really important. The other thing the sociologists talk about is that the purpose of marriage is to raise children. People get to that silver wedding anniversary mark, about 25 years. The kids are through school, through uni, finished their trades and are independent. So one theory is that that’s why we have marriages. Marriage is a very modern trend. It’s only been around for around 150 years, but the purpose of it may well have been to raise kids. After that people assess what they’re doing. I mean, there’s lots of theories, but certainly practically, there is a huge risk for relationship breakdown at that 25-year mark.
Benjamin Bryant: Heather, the big issue when ending a long-term marriage is that you and your partner will have accrued more assets, and the asset pool is more likely to be complex. I know we’ve dealt with this on previous episodes, but how do you go about dividing a lifetime of possessions?
Heather McKinnon: The Family Law Act sets out that roadmap, which is pretty good. So, to reinforce what we talk about in podcasts about property, we start with: what are the assets? So we have a look at every asset that’s in joint names or individual names. And the older you get and the more wealth you’ve acquired, the more likely there’s to be different asset categories. So there’ll be the primary marital home, there’ll be investment properties, share portfolios. Now we get a lot of cases where people have got fairly large cryptocurrency accounts, vehicles, possessions, boats, caravans. After Covid, thousands of silver divorces involve the valuation of caravans. Superannuation, which is an increasing place where our wealth is parked. And then for people who have been in self-employment, businesses, whether they’re held in private companies, trusts, things like that.
Benjamin Bryant: And don’t forget about the debts. Heather.
Heather McKinnon: Well, we’ve got that. We’re looking at what did we own and then what do we owe? And then the next step is looking at how do we value those. So what we do is, we get a balance sheet and our client will tell us what they understand they own and owe. And then we talk to the other side and find out what they think. Once we’ve got agreement on all those items, we then have to go through the task of which things are of agreed value, which things are not agreed. And then we start valuation processes. So in these later marriages, you’re often calling in forensic accountants to value businesses or complex accounting returns to have a look at whether trusts can be wound up or what’s a tax-effective strategy for how you might divide those things. Then we start the process of looking at what was each spouse’s contribution to the relationship.
So we start to have a look at who had what at the beginning, 25 or 30 years ago. Were there any inheritances? Were there any gifts? Were there any unusual factors that would mark it as other than an equal division? Obviously, the longer people are together, the more likely it is that the starting point will be an equal division. because we’re looking at a lifetime of contribution as parents, as homemakers, as people who go out to work. So that process of getting it all defined, looking at who did what.
Then we have a look at what’s each party’s future look like. So it’s more than likely these people are coming to you when they’re close to the end of their working lives. Although nowadays people like me might choose to work well into my 70s, and the other spouse may be somebody who retired at 55. So one person’s still got the chance to earn income and the other one mightn’t. We’re looking at different factors. Health. Often a marriage will end in the 60s or 70s because one spouse became unwell and the other person who’s still fit and healthy determines they don’t want to look after them. Which is something I see regularly. The trauma of that sort of health diagnosis. And the rubber hits the road rather than what we were traditionally trained to do, which was you’re supposed to be there. Some people just say, I’m not doing it. So that sort of process is what happens. But in younger people, the process is nowhere near as complex because the wealth creation hasn’t started.
Benjamin Bryant: That’s right. And for our listeners as well, We have discussed this four step process that the family law system takes in respect to property adjustments on our podcast before, so we can put the link to that relevant episode, in the notes to this episode as well. So please check that out.
Benjamin Bryant: And Heather, what about property that has been put in one partner’s name for asset protection purposes or other reasons? How is that treated?
Heather McKinnon: It’s really interesting. So if I go back to being in Coffs in the late 80s and I’d be acting for the wife of a Qantas pilot, we didn’t even look at superannuation. It wasn’t even seen as an asset. And these, defined benefit superannuation schemes would see the non-working spouse walk out with half of the house and that was it. And this Qantas pilot would walk out with half the house and a defined benefit super that gave him an income of 120,000 a year for the rest of his life. It was only in the late 80s that we started to say, oh, something’s not right here. These people have lived together for a long time and one’s going to have a lot better future. So superannuation is a family account, if you like, and it doesn’t matter whose name it is in. It’s about whether it’s acquired during a lifetime together. In fact, Parliament has a working committee at the moment where, shortly we’re going to legislate to make superannuation a family account, so that when young couples take time out of work to help raising children, they’re not behind the eight ball. The super becomes just a family account so that you don’t get that terrible feeling that you’re not worthy if you take 3 or 4 years out when you’ve got little ones. And that applies to both men and women. A lot of young blokes now take parenting leave, We’ve now recognised that it’s joint, but we’re actually going to make it a family fund shortly. In self-managed super funds, at the time of property settlement, we get to do a lot of financial planning that isn’t available if you’re not getting divorced. So if you like, one of the advantages is that you can start to restructure your retirement financial investment because you can transfer units within the fund without attracting capital gains tax, which you can’t do if you’re doing it outside of a separation situation. And then age pension. I mean, obviously, when you live together as a couple, your entitlement to the age pension, is a joint assessment of assets, and the amount you get is less than you get if there are two individuals. So there’s all sorts of financial planning that goes on when people divorce later in life and closer to retirement.
Benjamin Bryant: And what about something like bank guarantees for the kids or the grandkids to help buy a house? How is that treated?
Heather McKinnon: Well, they’re just liabilities of the parties. And that becomes one of those financial planning things. Because often one of the stresses that ends a long-term marriage will be one person’s attitude to whether you give capital to children while you’re still alive. So you get all these conflicts about one person wants to go travelling overseas and spend the kids’ inheritance, and the other one wants to sit at home and save it. So there’s all these themes that you see when you’re interviewing people.
The biggest one that I see, though, is when inheritance has come in, because it gives options and freedom. So that’s a really complex area, because you’ll have one person inherit $1 million from their family. The other person may not be going to get an inheritance, or if they are, it might be 20 years down the track. So how does the court deal with that? That’s really the field that you and I have to struggle with each day. How do you get justice and equity when you’ve been together for 30 years, and one of them suddenly gets this ability to make choices because of an inheritance.
Benjamin Bryant: And I was in a mediation with this exact issue yesterday. And of course, one party was saying it’s all about the inheritance and the other party was saying, what inheritance? So it’s very difficult. You talk about conflict and windfalls creating options and freedom for the parties. One of the sources of conflict a lot of people get themselves into is about small businesses. And in the relationship, the company advances some money for personal interests, and it’s recorded as a loan, as it should be. But then comes separation. How do they deal with that?
Heather McKinnon: Yeah, I mean, loan accounts are interesting because often in small businesses, parties have drawn on future income streams. So there’s a loan to the company to one or both of them. And we have to look at whether that is actually tax planning or whether one party has had the benefit of drawdowns, which they’ve used to invest in assets that we’ve got to claw back into the balance sheet. This field is endlessly fascinating and we have to be across tax law, financial planning, succession planning. What we call prospective inheritance is is someone going to get within the next two years, a huge drop of money from a parent who’s in their 90s? It is not easy to work in the field, and you’ve got to be able to spot issues that people haven’t thought about. It’s the more challenging and I suppose what keeps us interested in the work. Because if you’re into this stuff, we have the ability and the commercial lawyers hate us because we can unwind years of accounting and taxation planning work with the stroke of a pen.
Benjamin Bryant: If the parties haven’t done that themselves. And sometimes, we have clients that come to us and they just have this very simple solution. They may have even reached an agreement. This is just what we want. He’s going to get that. I’m going to get that. But to achieve that is very complex. And it takes a lot of legal analysts, takes a lot of taxation and financial analysts as well. And that’s hard for people to understand sometimes. Sometimes the solution is very complex to a clear intention what the parties want. So we have to guide them through that process..
Benjamin Bryant: Heather, health can be a concern later in years as well. What if one partner wants to sail off into the sunset while the other partner is struggling with a costly chronic condition? Is this considered at all in the property settlement?
Heather McKinnon: Absolutely it is. And as I was saying earlier, one of the catalysts for the breakdown of long-term relationships can be a catastrophic health diagnosis in one party. What we know is, if that happens in that age group from 50 to 70, it can be a major statistical blimp in terms of separation. So all those conditions that are degenerative over time, things like motor neurone, Parkinson’s, any of the early onset dementia cases, can lead to very painful and difficult decisions for the spouse who’s healthy. But what we have to do if they make the decision to separate, is: what capital is fair to give to each of them, given that one may be much less restricted in what they can do, and the other one may have needs for high-end care for a long period of time. I think the stats are most people will only go into care for the last two years of their life. But of course, there are many people who have to have intensive residential care and nursing assistance for years because of a complex condition, So what we do in practice is if you’re acting for the person with the condition, you have to commission expert medical reports to give the judge an understanding of the progression and the trajectory of the disease and what their expert opinion is of the needs of the client who is ill, versus the healthier spouse who may still be working and able to generate their own support for another ten years or so.
Benjamin Bryant: And unfortunately, there’s no crystal ball.
Heather McKinnon: No. Very difficult.
Benjamin Bryant: And Heather, we know about the works of Annabel Crabb, and we’ve read a lot about the financial risks to older women following divorce. What’s your advice to women who are divorcing in their 50s and beyond, and how do we ensure their retirement needs are met?
Heather McKinnon: So often in my generation, the woman has been the secondary earner. So she may have been a teacher or a nurse or worked as an admin manager. But her income, statistically ,is usually only half to two-thirds of the spouse. So it is really important that people get financial planning advice to look at what they need in terms of capital to provide a decent level of retirement. So if you’re acting for the financially less literate spouse, you need to get them to a financial planner early. So what you and I do is try and look at what our best estimate of the balance sheet is. So say we have a couple with super and house in Coffs, around that 2 to 3 million mark. We then say, go off to a financial planner and model what should you take out in terms of money for a house and what should you take out in terms of super? It’s getting people skilled up before they sign on the dotted line to make sure that the assets they’re taking are going to be able to give them dignity in retirement.
Benjamin Bryant: That’s right. Because we talk about justice and equity. We talk about the four-step process. What are the assets and debts, what were the contributions, what are the future needs. And we’re pretty good at giving a dollar sign and a percentage. And the court can absolutely do that. But ultimately what that means in real life terms for the party, that’s a matter for them. They need to work with that. They need to get the advice, that are not legal advise, to let what they are receiving as much or as little as it is to work the best for them moving forward.
Heather McKinnon: Correct.
Benjamin Bryant: And for most silver divorcees their children will be adults. But what are the obligations of parents to continue child support with things like university fees or contributions to mortgages?
Heather McKinnon: Very interesting. So you’ll have again, this conflict in our relationships where one spouse will want to support kids all the way to their master’s degree or the finishing of their trade. Others say, well, I went out, I left school at 18 and I never got any help, and I’m not going to hand any money over. What the Family Law Act and the child support system says in Australia is that we have an obligation to support our children through to the end of their first undergraduate degree or trade, assuming that you’re in that middle-class income earning area. So people who think that they’re on 150 grand a year and they can kick the kid out at 18 and get them to fend for themselves, might get a shock. But in my experience, most people want their children to reach their potential. So it is not common that we would get dispute on what we call adult child maintenance. But the other area, obviously, is children who reach adulthood with a significant disability, autism, intellectual delay, where they’re never going to be independent. And so those children do come into play, adult children, when we’re looking at property settlement. In those cases where families are affected by something like that.
Benjamin Bryant: And finally, Heather, I just wanted to talk about what happens after divorce. It’s certainly possible that couples will re-partner. Going into a new relationship later in life, when you’ve been accruing your life savings before the relationship begins, can present risks. I know you are usually not a fan of the prenuptial agreement, but in this instance, do you think this sort of arrangement may be a good idea?
Heather McKinnon: Look, I’m absolutely against them. And I will say that prenups or binding financial agreements, I think are not going to be the remedy that people think. I think, again, if you live with someone for two years and you think that you are going to be in a permanent second or third long term relationship, it’s all about financial planning. So one of the greatest tools we have is life insurance. And so if you have children that you want to provide for, it’s my advice to people in their 50s and 60s that they spend money getting life insurance, so that the kids can get the benefit of that, and then the new couple can go on to acquire the assets that they’re going to do together to maintain. Once you get to an age where life insurance is not feasible, then there does have to be really careful financial planning. So what you see sometimes is people transferring assets to children by agreement so that the capital passes to the next generation, so that there’s no risk of it being brought into the new relationship. That’s in very wealthy cases, obviously. So that there’s an agreement that you share, for example, the capital put into the home, but the capital that you’ve acquired prior to that may already pass over. There’s lots of ways of doing it. Every family is different. Just remember, statistically, there’s much higher chance of second relationships failing than first. And also be careful of arming children with capital who are in their 20s, 30s, and 40s because if their parents separated, the chances of their relationships failing are even higher than the general population. This is a field that’s fraught with difficulties, but you have to communicate. If you’re going to make a go on a second relationship, you’ve got to talk through your financial goals. You’ve got to be very frank in having a look at what you’ve got together, how you might provide and be very clear in discussing with adult children what the plans are, so that you don’t build this resentment over time.
The only people who, make money out of ill-planned second relationships and ill-planned estate planning are lawyers, and it’s not a good way to spend your capital that you’ve taken decades to acquire.
Benjamin Bryant: And Heather we’ve spoken about our views in respect to prenuptial agreements on the podcast before and, again, we’ll put the link to that episode in the in the notes of this show. But what I wanted to ask you, for those that when we say to them, look, we wouldn’t recommend a prenuptial agreement, perhaps for the listeners of this episode, you could just explain what we do, what we advise for people. If there’s an an asset disparity or capital disparity, how can we assure that that’s realised later on if there is a property settlement without a prenuptial agreement?
Heather McKinnon: So what I tell my clients to do at the beginning of the relationship: have fun, have the romance. You’re not in a de facto relationship until you’ve lived together for two years. That two years is sociologically really important, because if conflict’s going to arise, it happens usually within that period of time. But if after that you want to go ahead, it’s really important that at the date you move in together or at the two-year mark, you have reached agreement on what each of you bring to the relationship. What is your capital, what are your liabilities and an agreement on value? So in high-net-worth individuals, I suggest they actually get valuations on all the assets and they get printouts of bank statements and liabilities. Because I’m a big believer that the Family Law Act works. So as long as you know exactly what both of you bring in, there’s little chance you can get into conflict. Because the Act itself will help sort out what happens if the relationship fails. There are lawyers who will do binding financial agreements or prenups, but in my experience, it’s better to invest in valuations than it is in one of those agreements.
Benjamin Bryant: And look, and it may well be that a balance sheet is not very romantic, but look, nor is a prenuptial agreement. No.
Heather McKinnon: Yep. Exactly.
Benjamin Bryant: All right. Well, thank you, Heather for joining me on the show today.
Heather McKinnon: Thanks Ben.
Benjamin Bryant: Thank you for listening to this episode on Silver Divorce. As you will have heard there are a number of unique challenges to separation later in life and it’s important to enter into such a life-changing decision with an understanding of what’s ahead.
No matter your age, there is a world of questions when you’re going through a separation: that’s why we created this podcast. We now have an extensive library of episodes on different topics, featuring different experts. So make sure to review our growing library to find the answers you need.
If you have specific questions and can’t find the answers in our library, please email us on familymatters@bryantmckinnon.com.au. We will do our very best to get you the answers you need.
Have a look at our website (bryantmckinnon.com.au) where we have categorised the episodes to make it easier to find the information you are looking for.
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The information provided on this podcast is general in nature and not a substitute for personal legal advice. We recommend you consult an accredited family law specialist.