When superannuation is all there is
Superannuation is considered to be an asset for the purposes of family law property settlements and in some cases it might be the only asset left to divide. So what happens then?
The court recently considered a case where a husband and wife were married for 22 years and had two children together.
Due to poor financial choices, the husband became bankrupt during the marriage.
With only superannuation left, you might assume the property settlement would be straightforward.
However, the husband had created a self-managed super fund without his wife’s consent, which prompted the wife to start court proceedings.
During the proceedings, the pair agreed that the husband’s self-managed super fund should be equally divided between the two of them.
This would represent a just and equitable recognition of their various financial and non-financial contributions during their lengthy marriage. The court agreed.
One of the two issues for determination by the court was whether or not the wife’s entitlements should be split off into a separate fund of her nomination immediately, or wait until the fund shifted from its accumulation to payment phase.
The husband argued that the parties would benefit from not splitting off the wife’s entitlements given that the property owned by the self-managed super fund (being its major asset) would rapidly appreciate in value during the next 10 years.
If the wife was allowed to split off her entitlements in the self-managed fund, the husband said he wouldn’t be prepared for retirement, given the token amount of super that would be left.
The wife believed the opposite and asked that the husband be ordered to pay her court costs, given his conduct in the delaying the case and requiring it to proceed to a full hearing.
The court agreed with the wife and made an order that the wife receive her super entitlements from the husband’s self-managed super fund on the basis that:
· The wife did not agree to the husband starting the self-managed fund.
· The wife is entitled to make her own decisions in respect of how her super is to be invested.
· While the split of the wife’s entitlements would create serious financial repercussions for the husband (given the property would likely need to be sold) this was not a sufficient reason to deny the wife her entitlement to financial independence.
The case highlights the law surrounding bankruptcy and that superannuation interests may be retained by the bankrupt party given they do not own the superannuation, the trustee of the super fund does.
The wife was also awarded her entire superannuation balance on account of indemnity costs.
The court ordered costs on an indemnity basis given the low prospects of the husband being able to meet payment of the wife’s costs and the husband’s conduct during proceedings.
Every case is different, so it is important that you receive tailored advice to suit your circumstances from an experienced family lawyer.
You can make an obligation free and fixed cost appointment at Michael Lynch Family Lawyers by calling: (07) 3221 4300 or emailing: [email protected]
