Over 50 and broke: How to divorce without financial ruin

Wednesday, 28 June 2017

Paul Wilson says he has learnt from his marriage break-ups.

Paul Wilson knows better than most how divorce can deplete a person's finances. He has been through three marriage splits.

'First time in 1997, it was about $30,000 for me to fight to minimise my losses,' he said.

Even your KiwiSaver account could become relationship property.

'As the marriage had been two years and one week, everything had to be halved, even though I bought the house, I paid the mortgage, I paid the utilities and rates and insurances, I bought a car and was paying it off, I owned two cars prior to relationship which I still had.

'Everything got cut in half. Everything seemed very unfair, it was a cash-grab from the other side. I went in with a whole lot of personal items and $40,000 deposit for a house. I spent $30,000 on a lawyer and came out with less than $30,000 after settlement.'

Ten years later, he entered his second marriage with $120,000 of equity in a house and $80,000 in assets.

'But this time I made sure we agreed on settlement before we went to lawyers. I took a loan and paid out $105,000 which was $20,000 more than 50/50 split, but I wanted to make sure she had enough so my daughter had sufficient lifestyle and care.

'As all was settled beforehand, the lawyer only cost me $4000. I saved heaps there and I have a good relationship with the mother of my daughter.'

He split from his third wife last year. Now 47, he says he learnt from the previous experiences.

'We had an $800,000 property with about $250,000 equity and about $150,000 assets.

'I just wanted to run because it was all damn horrible and I didn't have any fight left in me, so I said 'think of a number and pay me something'. I came out with $70,000 cash and most of the items I had taken into the relationship. Again my lawyers costs were only about $4000. What I learned from the first experience was you may or may not win the battle, but the harder you fight, the more it costs in dollars and the toll it takes on you.

'You have to realise it is not your money, it belongs to the union. You lose, you lose, But you don't have to lose yourself in the process … It's only money.'

Selina-Jane Trigg, director of Family Law Results, said divorce was a key reason why people ended up off-track financially as they reached 50 and beyond.

She said no matter how a separation was handled, being forced to divide a household's assets would always have a significant impact. 'You can't halve the pie and still eat the whole pie.'

Often a split would mean dividing up retirement savings, including KiwiSaver, as well as a house and other investments. 'That can have real implications for the future.'

Trigg said people could also spend a lot of money just on the legal costs of a divorce.

She would encourage her clients to look at other options to avoid protracted negotiations handled by lawyers, which could quickly become pricey.

That might mean working it out between them and only calling on legal expertise where needed, as Wilson did, using mediation or collaborative legal processes.

She warned that people handling a divorce needed to approach their negotiations as calmly as possible. 'I think particularly women will make financial decisions based on emotions. They just want to settle. I urge them to take a more prudent long-term view of settlement because it does come up later or when they want to retire.'

She said it could be hard for women particularly to get back on track if they ended up picking up more of the ongoing childcare burden, while earning less than their former partners.

Financial adviser Liz Koh said not getting what they were entitled to was the biggest mistake people made when they split.

'I do see people who are really reluctant to cause problems with their partner when they are leaving. They are reluctant to demand what they are entitled to legally.'

She said people sometimes fought too hard to hold on to the lifestyle they had as a couple.

'They might want to still live in a five-bedroom home or send their kids to a private school and it can be really hard to adjust to a lower standard of living. Trying to keep the family home and everything the same for the kids can lead to problems, it becomes unaffordable.'

She recommended newly-divorced people stayed in the property market if they could, even if that meant buying a cheaper investment property and renting it out. 'You run a risk if you are out of the property market for too long.'

They should also do what they could to protect their assets from the breakdown of future relationships, she said. 'It's really important to protect your property going forward. Going into another relationship, so many people make the same mistake again.'

Retirement Commissioner Diane Maxwell said people should avoid retail therapy and seek independent help.

'If you can, move slowly, take time to consider your steps rather than making rash decisions driven by emotion that mean you sell or buy property in a rush. That applies to any big financial decisions – it's probably worth remembering you're going through a period of change and may be questioning lots of things you thought were certain.'

Trigg recommended that people seek financial advice about the best way to manage the assets they emerged with. 'Ask 'these are the assets I've come out of the relationship with, what's the best thing I can do with them to maximise my financial wellbeing?''

* This is the second in a Stuff Business series looking at the problem of debt and financial stress in people over 50.

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