It is common for two people to stay in an unhappy relationship for the sake of children and because they can’t afford to split their assets and income in half.
But it seems that now, the number of people who divorce later in life is on the increase. Known as silver splitters, they are over 50, the kids are off their hands, they have a home with little or no debt and they are looking for freedom and independence. There comes a point when two people may suddenly realise they have nothing in common any more if they have not invested in their relationship.
While a silver split can be mutual, more often it is triggered by one partner, leaving the other devastated both emotionally and financially. Women can be particularly vulnerable because of their lower future earning potential and higher life expectancy. Perhaps they have taken breaks in their careers to bring up children, or chosen a career path with pay inequity or low remuneration. A property division should take these factors into account but it doesn’t always.
Doing it later in life
Splitting late in life can be complicated because very often there are significant assets involved, as well as a variety of legal structures such as family trusts, companies and partnerships. Superannuation schemes and pensions also need to be taken into account. Sometimes one partner will attempt to hide assets or income. Dealing with this level of complication at a time when emotions are running high is not easy.
Getting your ducks in a row
There is little time to recover from a late split before retirement and silver splitters should ensure they get their full entitlement under the Property Relationships Act, taking into account future earning potential. This is no time to allow guilt or a desire to avoid confrontation to take precedence over your financial future.
The division of assets is a traumatic process as it usually means letting go of both memories and dreams of the future. There is a natural inclination for both parties to not want to let go of anything, but this is unrealistic. At the time of a split, hard decisions need to be made about what to keep and what to let go of.
From a strictly financial perspective, the best approach for each party is to take stock of the amount of wealth they have and their likely ongoing income and then decide how to best allocate that wealth for the best possible financial outcome. That may mean selling the family home or other key assets in order to get the right balance between the amount of wealth tied up in a house and the amount available for investment in liquid assets. Having too little in liquid assets (that is, investment which can be readily turned into cash) creates a problem of being ‘asset rich and cash poor’. The aim is to create a solid, albeit smaller, financial base to give security.
For some silver splitters one of the unfortunate outcomes is that one or perhaps both partners come out of the split with insufficient money to purchase a house, let alone have money available for investment. Owning a home instead of renting offers more security late in life as renting comes with risks of having a tenancy unexpectedly terminated and the uncertainty of what future rents will be.
Ownership can be an option using the following approaches:
Moving to a more affordable area – perhaps even another town or city
Sharing ownership of a house with family members or others
Locating land at the back of an existing dwelling on which a minor dwelling can be built (there are new policies around land intensification that may allow this and the land can be purchased or leased)
Topping up your available funds by using a home equity release product to make up the difference between the cash you have and the purchase price (get advice first)
Investigating affordable or social housing options in your area through your local Council or social agencies.
For many silver splitters, continuing to work beyond the age of 65 is necessary to achieve the goal of financial security. Working longer not only allows more retirement savings to be built up but also shortens the length of time of the retirement period, meaning less retirement capital is needed.
Building a new life
Setting new goals for retirement is an essential part of re-establishing a new life. This can take time as part of splitting up is re-establishing your identity. In a relationship, compromises are made to accommodate the other person’s differing goals. While being alone offers new freedom, it also creates an identity vacuum that needs to be filled by asking what you really want out of life. It can take several years to find the answer and to find happiness again, however it’s a lot easier if you have stabilised your financial situation.