Separating but staying together – what to consider if you remain in the same SMSF

In recent years I have noticed a growing trend in couples wishing to remain in the same self-managed superannuation fund (“SMSF”) as part of their family law settlement.  At first glance, it makes little sense but in order to determine whether it may be right for you, it is helpful to consider what might be fuelling the appeal.

Resoundingly the main reason for a party wishing to stay in the same SMSF as their soon to be ex-spouse after separation boils down to one simple fact – a winning return on investment.  The more money you have to invest, the greater your buying power both to attract the best rate of return on your investment and to negotiate the lowest management fees ultimately resulting in a superior yield.

 

Anecdotally other factors repeatedly feature in this growing desire:

  1. In the case of a “sleeper” spouse, a complete faith in the ex-stemming predominantly from the financial performances of the SMSF over recent years or, in the case of the more active member spouse, a continuing willingness to continue in this role. Surprisingly, the breakdown of a personal relationship does not automatically sever the specialisation of labour roles that can ordinarily become entrenched in long term relationships;
  2. A lack of a viable alternative. Being part of a SMSF is sometimes worn as a badge of honour.  A spouse may not want to surrender that title and move to a retail or industry based superannuation fund with management fees linked to the superannuation amount nor may they want to be solely responsible for managing their own independent and newly established SMSF but staying in the same fund and sharing the management fee not linked to the superannuation amount.  A new SMSF may not make emotional or financial sense; and
  3. A level of complexity involving the underlying assets. A SMSF that is heavily invested in say commercial premises from which one of the spouses operates their business may prove more difficult to unravel.

 

Are these reasons sufficient in the context of a separation?  Let’s look more closely at each one.

Undeniably the larger the investment (which staying in one SMSF can ensure) the greater the likely return.  However consider what even superior returns may be achievable joining in with one of the larger retail funds.  In the past decade, many of those funds have experienced returns into the double digits and on closer inspection may give your SMSF (no matter how so configured) a run for its money.  However, retail and industry funds have management fees linked to the superannuation amount whereas SMSF has a fixed rate, not linked to the superannuation amount.

A ”sleeper spouse” who judges his or her ex’s performance to manage the SMSF over the past 10 or 20 years and attributes all of its success to that person’s financial acumen would be naïve given the financial landscape which we have recently enjoyed and the historical upward trend in our wealth overall.  The true test of a funds ability to perform is possibly better judged in times of uncertainty and downturn.  Be cautious in blindly believing that the golden goose will continue to lay golden eggs.  The flip side of this for the more active soon to be ex-spouse / trustee of the SMSF is the need to consider how viable it is to “carry the load” into the future.  How will this dynamic or imbalance play out in the case of repartnering?  The primary purpose of superannuation is to provide for you financially in retirement.  This is a long term objective.  It is important to recognise that it is therefore deserving of long term planning.

Importantly there is no special honour in being a member in (and trustee of) a SMSF.  Those that properly understand the responsibilities that come with discharging trustee duties are often more open minded about alternatives.  Talk to your lawyer, accountant and financial adviser who may be able to assist you consider all the pros and cons of viable (and often less onerous) alternatives.

 

If after reading this you feel comfortable continuing in the same SMSF with your soon to be ex, then the following are important take home points for separating couples:

 

  1. Make an appointment with your lawyer or accountant to discuss and take steps to rectify any non-compliance issues;
  2. Ensure your annual audit is up to date and you have up to date valuations for any underlying asset held by the self-managed super fund as the ATO now relies on market value on an annual basis;
  3. Organise specialist superannuation advice in relation to the operative Trust Deed. Inform yourself properly on how the fund operates and what obligations fall on you.  Also, consider what is likely to occur in the case of a deadlock in the future management of the fund;
  4. Determine whether the Trust Deed is current or needs updating. Some excellent service providers offer a routine review of the Trust Deed at an ongoing modest cost;
  5. Think about and seek advice in relation to the investment strategy of the fund that best suits your now likely differing goals and insodoing reflect on your risk tolerance and investment objectives. Are you wanting the fund to invest in conservation or growth assets for example?
  6. Lastly, please ensure you are completely cognisant of an exit strategy. What are the prerequisites? How can it be executed?  What are the costs and who do you need around you to ensure its success?  How liquid are the investments?

 

Beyond all of this, if you have been the “sleeper’s spouse” in this relationship, it is now time to wake up and rise to the occasion and in the case where you have been the one in the driver’s seat, you may have to adjust to sharing that space.  In the context of separation, these consequences can be overlooked and need careful consideration for each member spouse of a SMSF.

 

 

About the Author

Lisa Wagner is Principal and Managing Director of Doolan Wagner Family Lawyers. Lisa is an Accredited Family Law specialist and a nationally registered Family Dispute Resolution Practitioner. Lisa has close to 30 years’ experience as a specialist family lawyer, experienced litigator and skilful negotiator in all family law matters.

Connect with Lisa on LinkedIn: linkedin.com/in/lisawagnerdwfl

 

 

Disclaimer:

These articles are only intended as an overview or comment on current issues that may interest you and are not legal advice. If there are any matters that you would like us to advise you on, then please contact us on (02) 9437 0010.

How To Face Your Separation With Confidence When You’re A Stay At Home Mum

Are you a “Stay at Home” Mum who is thinking about separating or a single mum who has recently separated?

Perhaps you’re worried that your husband or long-term partner is unhappy and may leave the relationship and family home without much warning? If you are or if you know someone who is in this situation then I urge you to keep reading as the following information might be critical.

Everyone going through a separation or divorce feels stressed and a lot of the time very unhappy and worried. Stay At Home Mums who are transitioning to being single mums have unique stresses that they face throughout the separation or divorce processes that hugely impact on their ability to remain strong and get through the ordeal with everything in fact including their children’s wellbeing and their financial security.

If you’re a Stay at Home Mum then chances are:

  1. You have been married or in a de facto relationship for at least 4 or 5 years, probably longer, and all your finances have become mingled with your spouse’s affairs. You are likely to have at least some joint bank accounts, credit card facilities, home loans etc. You may have even been appointed as the secretary or director of your husband’s company (if he has one) or named as a shareholder in a family business. You may also have been named as a beneficiary in a trust that has been established by your joint accountant to legitimately minimise the tax your family has to pay overall each financial year. You might not even completely know what you are or are not named on or what joint assets you part own and/or what joint liabilities you are responsible for. When you start to look around it may surprise you that you don’t have a bank account in your own name anymore, you don’t have any independent money that you control exclusively, you don’t know where income comes from or how the bills are paid, and you don’t even have your own credit card facility and are merely a supplementary cardholder to a credit facility belonging to your husband which can be cancelled at any time by him without any notice to you. In the space of what seems like a blink of an eye, you have become totally and significantly financially dependent on your spouse or your de facto partner.

2. You have dependent and often very young children to look after, usually almost singlehandedly for 24 hours each day, 7 days a week. This is a relentless, exhausting, inescapable (and not to mention often thankless) commitment that simply cannot be forgotten or overlooked. This factor alone impacts enormously on your ability to do a lot of things. In separation and divorce, the two things that children impact on the most are your ability to secure a decent family-friendly job and your ability to earn an income sufficient to meet all the basic expenses it costs to run a household in Sydney. To make matters worse, if your husband has left the family home then he may not be contributing (or maybe under-contributing) to the running of the family home, especially if he is now housing himself and has a second lot of “household” expenses to pay, including rent. Social media is saturated with complaints from single mums about the difficulties of trying to find work that they can do when they have family commitments. Moreover, if you have been a Stay at Home Mum for a while it is likely that the skillset that you had developed pre-kids is now rusty, or maybe even obsolete. This can leave you feeling like you have no option other than taking on a more menial job (which can have greater family-friendly hours) like cleaning or supermarket shelf stacking, or taking on a full-time role and somehow securing affordable (if there is such a thing!) and available (at the risk of sounding repetitive – if there is such a thing!) child care, the costs of which “eat into” your salary. Alternatively, you might contemplate letting your children become “latchkey” kids.

  1. Your housing requirements are significant especially with two or three children in your care, and the costs of housing in Sydney are highly prohibitive for many Stay-At-Home single parents. For example on Sydney’s North Shore, where my office is located, the September 2020 statistics* depict that the median house price for homes was considerable, namely:
  • Lindfield – $2,880,000
  • Ryde – $1,557,500
  • Turramurra – $2,150,000
  • Mosman – $3,700,000
  • Lane Cove – almost $2,375,000
  • Frenchs Forrest – $1,615,000

*Price data from 02 September 2020. Data supplied by Hometrack Australia.

To make matters worse, it is well known that it can be very difficult to rent modest child-friendly family homes in the above areas for less than $900 a week.

For example, Stay at Home Mums facing a separation on Sydney’s North Shore who are looking to set up an independent household have fewer housing options available to them than some other separating couples. The need for and costs of larger dwellings for Stay at Home Mums and single mums are disproportionately expensive on Sydney’s North Shore and overwhelming stressful to secure.

If you are a Stay at Home Mum who has not yet separated but feels that you and your partner have exhausted marriage counselling services then the best thing you can do is plan ahead.

Planning ahead really involves two stages namely:

  1. Creating a short-term plan; and
  2. Creating a “forever” (or “almost forever”) plan.

Stay at Home Mums who are contemplating a separation must seriously consider what they need to do to become stronger and regain some of their independence. Opening up a bank account in your own name is a good start. So too is applying for your own credit card. It is not necessary that you start using this credit facility, but it is really handy to have a credit card in your own name that you can control. It can provide you with an enormous amount of peace of mind. Next you need to do a budget (right down to the nitty-gritty) so you understand the basic monthly costs that you will have and what sacrifices you may need to make to “trim the fat”. Whilst this can be a downright frightening process to undertake it is vital.

Also read: Separation Checklist

Often when you are working on this plan you may start to confuse short term and long-term considerations. Two of the most common mistakes that Stay At Home Mums make at this point are looking straight away at their work options and also at housing – it is the right time to look at these things but it’s not necessarily the right time to act on those options just yet. These issues are vital, but they are long term considerations. Making decisions right now about things that can have long term consequences can result in long term problems. If you haven’t already done so by now you should get specialist family law advice. It may even be wise to consider getting some advice from a financial planner or financial counsellor, especially if you have become rusty in managing your own financial affairs independently. Each of these specialists can give you clear advice and show you reliable strategies to help you achieve short-term and long-term independent success.

It is my view that a lawyer who is accredited with the Law Society of New South Wales in the area of family law is your best resource at this time. One (or sometimes two) appointments are often enough at this stage to help you understand your real position and help to dispel many of the myths and half-truths that you have been hearing “on the grapevine”. It is important to remember that every family, its circumstances, and the nature of the family breakdown are different. Accordingly, well-meaning friends and family members, and even some counsellors, mediators and facilitators, who may be great with a whole range of things cannot really give you clear, accurate legal advice about what your rights, your proper entitlements and your likely responsibilities will be for your personal situation. And, even if they do, you should not rely on it even if it sounds good or makes you feel better at the time. Feeling good just for the sake of it or thinking that you’ve sorted something out when you really haven’t is what you should be striving to achieve in your separation just yet. Having a clear picture of where you stand legally is imperative for your short-term and long-term success.

Most ideas and suggestions work for some people, some of the time and in combination (often but not always) with other steps. But any suggestion that you act on in isolation and without advice, at the wrong time or in the wrong sequence can spell disaster for you and your family. Examples of this are severing joint tenancies, closing joint bank accounts, trying to get partners’ names off tenancy agreements, transferring car registrations, making child support applications and even getting a job packing shelves at your local supermarket. When you are experiencing a separation or divorce it is sometimes difficult to see beyond your own experience and you may find that a perfectly logical idea acted on right now doesn’t always end up working out in the way that you thought it would at the time.

Long term or “almost forever” planning is different for every person and depends on a range of factors which are unique to each person and their family’s circumstances. For example, how tolerant you are of placing your children in long daycare five days per week and/or how much do you value being a Stay At Home Mum who personally cares for her children, or what is your level of willingness to re-train and re-enter the workforce on a full time or part-time basis. All sorts of questions will need to be asked and eventually answered. Is it vital for you to continue to put your career on hold for a long while? Can you even afford to do this?

Stay at Home Mums, including those working part-time, face unique challenges in the separation and divorce process. Getting it right from the start is crucial. Importantly any useful tips, in the wrong sequence, at the wrong time and not in the right combination are not necessarily a good idea.

In conclusion:

  1. “Shared parenting” does not mean equal time – this is especially true when considering what are appropriate post-separation parenting arrangements for children under 4 years of age or in situations where there is a significant distance between mum’s home and dad’s home; and
  2. Mediation and Family Dispute Resolution are processes. They are great alternatives to going to Court for most families, but they do not provide the answers nor do they give advice about what your rights and entitlements are. Alternative dispute resolution processes require both parties to be willing to compromise, a step that you shouldn’t take without knowing what your rights and entitlements are. You wouldn’t buy medicine without getting a script, you wouldn’t choose fashion sunglasses for your children if they needed to see an optometrist for testing and you probably wouldn’t even go on a family bushwalk without understanding something about the weather, terrain and grading. Most of you no doubt get your accountant to prepare your tax returns each year. Only a lawyer experienced in the family law arena, preferably an Accredited Family Law Specialist, can provide adequate family law advice on your rights and entitlements. Your children and your financial security are two of the most important things to you. Don’t confuse Google search information, rhetoric and suggestions from friends, family members or even counsellors and family dispute resolution practitioners as the best advice – they are not trained in the field.

I know that anyone reading this article who is faced with these dilemmas will benefit from a proper initial consultation with an Accredited Family Law Specialist. Don’t waste time with a “meet and greet” preliminary interview or a free chat on the phone. You need to actually obtain quality family law advice which is tailored to you and your family’s needs and circumstances. It will cost you some money but in my view, it is a smart investment in your and your family’s future – now is not the time to gamble with your decision making, for you and your family.

Doolan Wagner Family Lawyers offer specialist family law advice in St Leonards on Sydney’s North Shore. We have a dedicated team of experienced family lawyers prepared to handle your matter effectively and efficiently, providing reliable, direct and practical advice. If you have recently separated or have a Family Law enquiry, please contact us on (02) 9437 0010 or email at enquiries@familylawyersdw.com.au

About the Author:  Lisa Wagner is Managing Director and Principal of Doolan Wagner Family Lawyers. Lisa is an Accredited Family Law specialist and a nationally registered Family Dispute Resolution Practitioner. Lisa has close to 30 years’ experience as a specialist family lawyer, experienced litigator and skilful negotiator in all family law matters.

Connect with Lisa on LinkedIn

Disclaimer: This post is only intended as an overview or comment on current issues that may interest you and are not legal advice. If there are any matters that you would like us to advise you on, then please contact us on (02) 9437 0010.

What are the legal implications of parental alienation?

Parental alienation is a term which is used to describe when one parent (the “alienating” parent) behaves in a certain way to undermine and damage the other parent’s relationship with a child.

Whilst this term is considered to be controversial and there is a reluctance by the Court to label certain behaviour as this, it is apparent that behaviour which falls under this definition is becoming more and more common, particularly when there are parenting proceedings on foot. The uncertainty arising from COVID-19, is likely to see an increase of these cluster of behaviours.

Case Law

In determining what is in the best interests of the child, the Court must consider primary considerations as set out in Section 60CC of the Family Law Act 1975, being:

  1. The benefit of the child having a meaningful relationship with both of the child’s parents; and
  2. The need to protect the child from physical or psychological harm from being subjected to, or exposed to, abuse, neglect or family violence.

Although there is reticence for the Family and Federal Circuit Court to identify and label a parent’s behaviour as “parental alienation”, there have been numerous cases where the Court has recognised such behaviour and accordingly made orders to change primary residence in circumstances where one parent poses an unacceptable risk of harm.

In Lankester v Cribb [2018] FamCACF 60 (6 April 2018), the Mother was the primary carer of a nine-year-old child and it was alleged by the Mother that the Father of the child had sexually abused her.

During the course of the proceedings, evidence was produced demonstrating that the Mother had been frequently questioning the child about sexual abuse including, on one occasion, having recorded the conversation and the child’s complaints. Whilst there had been medical examinations of the child and an assessment undertaken by the Department which concluded there was no evidence of sexual abuse, it was the Mother’s view that the Father had sexually abused the child.

Also read: Q& A | Separation, Child Custody and Parenting

After the Family Consultant met with the parents and child, it was expressed by the Consultant that in their opinion as a result of the Mother’s behaviour namely the unfounded allegations, the child would be “exposed to continuing distress and confusion about her relationship with [the Father] whilst she lives with [the Mother]”. Further, that as a result of the Mother’s behaviour, each changeover would be a “highly stressful experience” for the child which would likely affect the child’s emotional and social development, in turn impacting upon the child’s capacity to connect positively with her Father.

Although the Court recognised that changing a child’s primary residence may result in grief, loss, confusion and a high level of stress, these adverse consequences were considered to be outweighed by the risk the Mother posed to the child should the child continue to live with her. On the basis that the Mother posed an unacceptable risk of harm to the child while in her care, the Court ordered that the child’s time with the Mother be suspended for a period of six months, after which time there be a staged reintroduction of time (including planned supervised and unsupervised time) with the Mother.

Similarly, in Goldman v Goldman [2018] FamCACF 65 (12 April 2018), the Court changed the primary residence of the two children (aged 11 and 13) as a result of the Mother’s behaviour. This was largely based on the Single Expert’s opinion that the children had a “close dependent relationship” with the Mother which was “not conducive to good future mental health”.  The Court also formed the view that the Mother was entirely focused on punishing the Father by “… turning the children’s affections away from him” which in turn caused emotional harm to the children and posed a continuing unacceptable risk of harm to them.

The consequences of parental alienation

As a consequence of the Mother’s behaviour, a change of residence was ordered which resulted in the children living with the Father. The Court also ordered that the children’s time with the Mother be suspended for a period of four weeks, after which the children spent supervised time with the Mother for one year, and thereafter in accordance with a gradual and incremental increase of unsupervised time.

It is not often seen that the Court orders a change of residence for children from one parent to another. Where it is established, however, that one parent’s behaviour has (and will continue to) harmfully impact a child and/or their relationship with the other parent, the Court will consider such an outcome. This is the case even if such behaviour is not labelled as “parental alienation”.

Doolan Wagner Family Lawyers offer specialist family law advice and are based in St Leonards on Sydney’s North Shore.  If you have recently separated or have a Family Law enquiry, please contact us on (02) 9437 0010 or send us an email at enquiries@familylawyersdw.com.au to discuss your matter in complete confidence.  We have a dedicated team of experienced family lawyers to handle your matter effectively and efficiently, providing you with reliable, direct and practical advice.

About the Authors:

Lisa Wagner is Managing Director and Principal of Doolan Wagner Family Lawyers. Lisa is an Accredited Family Law specialist and a nationally registered Family Dispute Resolution Practitioner. Lisa has close to 30 years’ experience as a specialist family lawyer, experienced litigator and skilful negotiator in all family law matters.

Connect with Lisa on LinkedIn: linkedin.com/in/lisawagnerdwfl

Ashleigh Middlin is an Associate at Doolan Wagner Family Lawyers. Ashleigh’ s background in child protection and matters of domestic and family violence has created in her a highly empathetic approach towards her clients. She is focused on assisting clients to finalise their matter as efficiently and cost-effective as possible. Ashleigh’s areas of expertise include property settlements, including negotiated agreements, lawyer-assisted mediations, parenting matters relating to the care of children including negotiated agreements and litigation and child support and spousal maintenance matters.

Connect with Ashley on LinkedIn: linkedin.com/in/ashleighmiddlin

Disclaimer:

These posts are only intended as an overview or comment on current issues that may interest you and are not legal advice. If there are any matters that you would like us to advise you on, then please contact us.