Family Law Property Settlements – Should you trade super for cash?
Superannuation is property and can be split from one person to another as part of a property settlement.
Statistics tell us that women have less superannuation than men. This inevitably means that as part of a heterosexual property settlement there needs to be a split of his superannuation to her.
The gender pay gap is still stubbornly sitting at about 19%. Many families also make the choice that the mother will not return to work full time or at all so to care for young children. This is all well and good until a separation; whilst together the mother has the ability to rely on her partner’s superannuation in retirement. After separation however it is not uncommon for a mother to find herself in a financially vulnerable position; lower income, the responsibility of caring for young children and lower superannuation savings.
And so comes the tempting part when dealing with superannuation in a property settlement: Should I trade the super which he should pay to me for more cash now? This might enable mum to keep the family home in circumstances where the banks wouldn’t lend to her because of a broken work history or lower income. This may be done for a number of reasons such as the need for shelter or to avoid having to uproot children from a familiar environment. And in my experience blokes are protective of their super and happy to do a deal; after all, if they have a good income they often have better capacity to recover from the hit to the hip pocket. However, this may mean for the female that in focusing on satisfying the present need for a roof over their heads that many women will sacrifice an adequate retirement income.
Can it be done? Yes. But generally, the Court does not take a creative approach to dividing property including superannuation in a property settlement. So if a creative solution is what you’re after then the Court is not the place to go.
However, a recent Industry Super Australia report presents some alarming figures which should caution women about being too quick to trade super for cash: 40 percent of single retired women are currently living in abject poverty and 63% of single women will not be retiring comfortably by 2055.
I advise all of my clients (not just women) to seek financial planning advice when it comes time to crunch the numbers in a property settlement. The most important thing is for clients to be fully informed and to understand the implications of their decisions.
Iveta is a solicitor at Farrar Gesini Dunn specialising in Family Law and Estate Planning.