Seperation & Divorce. October Support, education and understanding

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1 Seperation & Divorce October 2014 Support, education and understanding

2 Separation & Divorce In this White Paper we explain the basic steps in any divorce proceeding, our experience in ensuring the process remains transparent and why an experienced financial planner can be invaluable. Every year in Australia close to 50,000 people are faced with the breakdown of their marriages and divorce. This creates a great deal of uncertainty and stress for both parties to a relationship and many people are not fully aware of the potential implications to their future success. Many financial advisers are not interested in assisting clients during the negotiation or discovery process, as their primary focus is on investing the funds received in settlement rather than maximising it. Our extensive experience in the industry has identified a lack of useful and insightful support and advice to wives during the separation and divorce process. Our financial advisers have helped many divorcing wives to navigate the many challenges that result from relationship breakdown. Our experience spans the information gathering, negotiation, settlement and post-settlement process; each of which is equally important. What is Sornem Private Wealth? Sornem Private Wealth is a private wealth management and financial advisory business. We provide tailored financial and investment advice to long-term clients, family groups and corporates. Sornem Private Wealth is a private company that is owned and run by the staff that work in the business; we are one of the few remaining independently owned and operated advisory businesses with no dealer group associations.

3 Insights The Australian Bureau of Statistics reports that around 50,000 divorces are granted yearly The impacts of any divorce are life changing and span not only the emotional grief and adjustments but huge implications to the financial affairs of the couple involved. In most relationships, one partner has the control over the majority of the assets and bank accounts. Further, third parties such as accountants, bookkeepers and bankers tend to side with this person to ensure their fee revenue continues. When a divorce inevitably gets messy, the partner with control typically exerts their financial influence in order to tilt the result in their favour. This is where we are different; our experience and preference is to work with the partner without control. Process Many people believe that the divorce process is quite simple; however, it can be an incredibly difficult and drawn out process that profits no one but the lawyers involved. We believe there are four keys in any divorce proceeding or negotiation and strive to achieve these for each of our clients; I. Transparency Ensuring that both parties are provided with a full understanding of their accumulated assets, entitlements and the potential legal fees; II. Support Emotional support during the divorce process is important but so is the technical support required to understand the many questions asked be they business, taxation or investment related. III. Confidence The most important factor in any divorce is having confidence in where you stand, what you require and what you are entitled to. This will allow you to keep your mind on the most important things. IV. Education The learning process does not stop once a settlement is received. For those that have little experience in managing the finances of the family the change can be incredibly difficult. We approach the financial advisory process with a focus on education. The value of professional financial advice and a sounding board for important decisions during a divorce is immense and without support devastating results may occur. It is important that you have support across the financial, legal and emotional aspects of your situation at every stage of the process.

4 Stage 1 Pre-Divorce The majority of financial advisers wait until after a property settlement is received before providing their expertise to divorcees. We understand first-hand the value good financial advice can add and therefore provide assistance from the day the divorce is first contemplated. Our dedicated team have expertise in assisting with the following areas: Estimating your immediate needs in terms of income support and assets; Arranging for meetings with various family lawyers; Locating all the assets of the marriage and compiling relevant information; Researching assets that may have been hidden by the other party; Ascertaining the fair value of each asset; Analysing loans and liabilities; Reviewing business and family trust structures; Providing a clear assessment of the total value of your assets and liabilities; Developing realistic budgets for your situation during and post-divorce; Ensuring that you are aware of your rights, entitlements and the expected costs of the process. We have contacts throughout the financial services industry that allows us to put together an accurate picture of your position quickly. In many cases it is possible to arrange the stopping of all transactions on your joint accounts through as little as a phone call. This is a drastic but important step if it is likely your partner will simply spend any cash they can access. The Financial Statement One of the most daunting steps for any divorcee is the preparation of a Financial Statement; which is required by the Family Court of Australia in order to commence divorce proceedings. The Financial Statement is an incredibly detailed questionnaire that requests information on every asset and your anticipated income needs in requirement; completing this can be difficult for even the most experienced investor. The most important step in the pre-divorce process is ensuring that you have a full and transparent standing of where you stand and the level of settlement you may be able to achieve.

5 Stage 2 Divorce The most cost effective manner in which to come to a property settlement in divorce is typically through collaboration and mediation. In many cases, however, neither party is willing to negotiate and hence the engagement of Family Lawyers is required. It is at this point where the process can get messy. The divorce process is filled with Family Court hearings, letters between lawyers, mediations and any number of other disagreements. During this stage of the process it is important to have the support of an advisory team that have experience dealing with commercial matters, not just buying and selling shares. Our background in both financial advice and business consulting has provided us with the expertise to assist in the following areas: Ensuring that you are aware of your rights, entitlements and the expected costs of the process; Knowing the common ways in which assets are hidden or their values reduced and identifying these; Providing a sounding board for questions of a commercial nature such as superannuation, business management or debt related matters; Liaising with other third parties for advice during the negotiation process including asset valuers, lawyers, accountants, private bankers and property agents; Reviewing and identifying issues with financial data and bank statements; Estimating the level of income you will require after divorce and likelihood of this being achieved based on the information available; Identifying the assets that are the most tax effective and supportive of your future goals. It is important to keep in mind that the courts will make property settlement orders taking into account the following factors: Your assets and debts The financial contribution by each party (wage and salary earnings) The indirect financial contribution by each party (gifts and inheritance) The non-financial contributions by each party (caring for children and home-making) The future financial requirements of each party. We have experience dealing with many of Australia s most well-known family lawyers and providing valuable information to support their work. The divorce process is one of inefficient information whereby one party normally holds all the cards and is able to influence the result in their own favour. This is where we can be of greatest value.

6 Stage 3 Settlement Even once the settlement process appears to be nearing an end, the long-term planning is just beginning. It is important to consider the long-term financial implications for you and your family throughout the process rather than at the end. Throughout the divorce process we continually address the following: Your personal and financial goals and the priority of each; Your ability to work once the divorce is final and your future earning potential; The future costs for your family including university, housing and relocation; Your post-settlement income and cash needs; The timing of and your financial needs in retirement. As the settlement nears our financial advice can provide further value by: Reviewing the after-tax results of any proposed settlements; Estimating your maintenance and income needs; Analysing your likely long-term cash flow and net worth; Outlining the options for your superannuation assets; Comparing and contrasting settlement proposals; Developing alternate settlement proposals; Arranging the appropriate structures through which your settlement is best managed in the future. In many cases this can be the most important stage of the process. For many higher net worth families the entity structure is incredibly complicated with various family trusts and companies, taxation implications and the potential for longer term liabilities. This is particularly important in light of the changes to the tax legislation that were made during 2014 that relate to private companies and trusts.

7 Post-Divorce Financial Advice It is at the point of property settlement that the reality of divorce is completely felt. Our focus in this period is on smoothing the transition from your marriage to your single life and providing you with the support and confidence required to move on with your life. At this stage everything changes, you are now in complete control of your finances, your investments and every aspect of your situation. Not only do you need to worry about who you should bank with but you need to consider many factors including the following: Setting and abiding by a budget for the years to come; Generating an income from your settlement to meet your expenses; Preparing a new Will and powers of attorney; Arranging for the transfer of the relevant assets into your own name; Ensuring you have sufficient insurance in place to protect your family; Determining if and how much you can afford to spend on a new home; Identifying appropriate investments for your future; How to manage the paperwork associated with your investments; Determining which superannuation fund is best for you; Preparing a long-term financial plan to ensure you are able to retire comfortably. At this stage of the process we take an educative approach and focus on providing information to our clients to ensure they understand every aspect of their financial situation. This may include discussing the difference and purpose of various types of investments, assistance to obtain training for a new career or referrals to property advocates to assist in the relocation process.

8 Contact Us At Sornem Private Wealth we differentiate ourselves from the industry through the following initiatives: We maintain our independent-ownership; We operate under our own license; We refuse to receive commissions based on the investments we recommend; We provide proactive advisory services, meeting each client quarterly; We remain at the forefront of the industry through our investment in research; We apply a tailored approach to building recommendations; We focus on the long-term income requirements of our clients; We negotiate fees directly with our clients. If you would like to learn more regarding our expertise in divorce please do not hesitate to contact us on the contact details below. All initial meetings are complimentary with no ongoing obligations. Mr Jamie Nemtsas, Managing Director Mr Drew Meredith, Partner & Senior Adviser Sornem Private Wealth Pty Ltd AFSL , ABN Level 1, 360 Little Collins Street Melbourne, Victoria 3000 Australia T F