What are some of the things to be aware of when it comes to family law matters and your employment?
A recent article in Forbes takes a look at career scenarios that can influence your divorce settlement. We think it raises some really important issues for consideration, so let’s take a look at what the article reveals. Note that Forbes is a US publication, and the family law systems in Australia and the US are quite different. However, these particular issues happen to be just as relevant to Australians going through a divorce.
If divorce is on the horizon, you might want to think twice before you make any major changes in your life in terms of your career. Should the divorce be looming at a time when you are changing your career, swapping jobs, or retiring, it may well influence your income for the purposes of a property settlement. Of course, sometimes change might be imposed on you, such as if you lose your job. Let’s take a look at the ways changes to your work could impact on your share in a property settlement.
Income is a crucial element of any property settlement. In a property settlement, the courts look at each party’s past contributions as well as their future earning capacity and future needs. Apart from a division of the marital pool of assets and liabilities, the courts might also be tasked with considering spousal support. So if things change in terms of a party’s income, there can be an effect on the eventual property settlement including any spousal support payable. Here are several ways this might occur.
Changing careers
Swapping jobs when you’re also going through a divorce could add to the stress that you’re likely to experience from your breakup. But not only that, it may impact on the assessment of your future needs in the property settlement.
On the other hand, if you take a job with less remuneration, there may be closer scrutiny as to the reason for you doing that – as the assessment on future needs (as well as spousal maintenance) is about capacity to pay, not just your actual current income.
We explained what happens if a party quits their job during divorce on our blog a while ago too. The upshot is this: making a deliberate, strategic decision to quit a job—as opposed to being made redundant or being terminated due to factors such as poor performance (which can of course also be deliberate)—does not magically reduce an individual’s earning capacity. And courts won’t support someone’s decision not to work (or to work less) in order to avoid financial obligations or to gain a perceived strategic upper hand in the property settlement.
Job loss
If you lose your job during divorce, things are a little different. If you are losing income involuntarily, you may or may not be held to your previous income level. The reasons why you lost the job are important here. The court will view things differently if your job loss was performance-related rather than something outside your control, such as company restructuring and redundancy. The key here is whether your job loss was or was not caused by you.
Retirement
When it comes to retirement, there are numerous issues to consider, from superannuation to pensions. Your family lawyer is best placed to advise how this might impact your property settlement.
Severance pay
Severance packages might need to be taken into account. Generally there are two options: the severance lump sum can be treated as an asset to be divided, or you can incorporate it into your income.
Annual bonuses etc.
Another compensation issue to consider is whether bonuses and commissions will need to be factored in. Again, decisions need to be made on whether these are compensation for work already done before the divorce, or whether they are intended to incentivise you for future work. There’s usually some element of work performed before the divorce, meaning part might be divided. Or, if it was used as income in the marriage, it should be treated as the same during the divorce.
Because of the complexity of these matters, it’s important to make sure you disclose any potential career or work-related factors to your family lawyer. They can help you model different scenarios and different tax implications so that you can find the best position for negotiations.
Ultimately, it’s best to try avoid adding more uncertainty and risk to the mix by making big career moves at the same time as you are going through a divorce. If you can, you’re better off waiting for the dust to settle first.
Source: Forbes
Do you need assistance with your divorce or other family law matter? Please contact Canberra family lawyer Cristina Huesch or one of our other solicitors here at Alliance Family Law on (02) 6223 2400.
Please note our blogs are not legal advice. For information on how to obtain the correct legal advice, please contact Alliance Family Law.
What are some of the things to be aware of when it comes to family law matters and your employment?
A recent article in Forbes takes a look at career scenarios that can influence your divorce settlement. We think it raises some really important issues for consideration, so let’s take a look at what the article reveals. Note that Forbes is a US publication, and the family law systems in Australia and the US are quite different. However, these particular issues happen to be just as relevant to Australians going through a divorce.
If divorce is on the horizon, you might want to think twice before you make any major changes in your life in terms of your career. Should the divorce be looming at a time when you are changing your career, swapping jobs, or retiring, it may well influence your income for the purposes of a property settlement. Of course, sometimes change might be imposed on you, such as if you lose your job. Let’s take a look at the ways changes to your work could impact on your share in a property settlement.
Income is a crucial element of any property settlement. In a property settlement, the courts look at each party’s past contributions as well as their future earning capacity and future needs. Apart from a division of the marital pool of assets and liabilities, the courts might also be tasked with considering spousal support. So if things change in terms of a party’s income, there can be an effect on the eventual property settlement including any spousal support payable. Here are several ways this might occur.
Changing careers
Swapping jobs when you’re also going through a divorce could add to the stress that you’re likely to experience from your breakup. But not only that, if your income changes, this might actually only benefit your ex. If you are taking a new position with a higher remuneration, there might be less or no spousal support payable by your ex. It might also impact on calculation of your future needs in the property settlement.
And yet, if you take a job with less remuneration, and you are the one potentially liable for support, this will not reduce your support obligations. Spousal maintenance is determined by one spouse’s reasonable needs and the other spouse’s capacity to pay, which takes into account earning capacity (not just actual current income). So, courts will look at what each party was earning right before they quit their last job and their efforts to obtain employment since.
We explained what happens if a party quits their job during divorce on our blog a while ago too. The upshot is, making a deliberate, strategic decision to quit a job—as opposed to being made redundant or being terminated due to factors such as poor performance (which can of course also be deliberate)—does not magically reduce an individual’s earning capacity. And courts won’t support someone’s decision not to work (or to work less) in order to avoid financial obligations.
Job loss
If you lose your job during divorce, things are a little different. If you are losing income involuntarily, you may or may not be held to your previous income level. The reasons why you lost the job are important here. The court will view things differently if your job loss was performance-related rather than something outside your control, such as company restructuring and redundancy. The courts might decide you still have the same earning capacity, or that you lost your job strategically with bad performance. It’s important that you can show that your job loss was not caused by you.
Retirement
When it comes to retirement, there are numerous issues to consider, from superannuation to pensions. Your family lawyer is best placed to advise you if you are retiring and how this might impact your property settlement.
Severance pay
Severance packages might need to be taken into account. These are usually treated as income as they are intended to replace income. If you are able to replace the income stream with another job straight away, then you have two options. You can either treat the severance lump sum as an asset to be divided, or you can incorporate it into your income.
Annual bonuses etc.
Another compensation issue to consider is whether bonuses and commissions will need to be factored in. Again, decisions need to be made on whether these are compensation for work already done before the divorce, or whether they are intended to incentivise you for future work. There’s usually some element of work performed before the divorce, meaning part might become an asset to be divided. Or, if it was used as income in the marriage, it should be treated as the same during the divorce.
Because of the complexity of these matters, it’s important to make sure you disclose any potential career or work-related factors to your family lawyer. They can help you model different scenarios and different tax implications so that you can find the best position for negotiations.
Ultimately, it’s best to try avoid adding more uncertainty and risk to the mix by making big career moves at the same time as you are going through a divorce. If you can, you’re better off waiting for the dust to settle first.
Source: Forbes
Do you need assistance with your divorce or other family law matter? Please contact Canberra family lawyer Cristina Huesch or one of our other solicitors here at Alliance Family Law on (02) 6223 2400.
Please note our blogs are not legal advice. For information on how to obtain the correct legal advice, please contact Alliance Family Law.
