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Amanda Morrall looks at the cost of marital breakdown and how to dissolve the relationship without breaking the bank.

Posted in Personal Finance
See video

By Amanda Morrall

About one-third of New Zealand marriages end in divorce, that compares to a divorce rate of 50% in many other other countries.

The leading cause of break-up?  Money.

How should a couple handle the break up process with respect to the money? Here's some of my thoughts based on my own experience. See also my five point plan for when love goes sideways here.

1) Last resort

I would hope that most couples have explored all their options before taking this final step. On that note I would add that the  Family Court offers free counselling sessions to couples who are thinking about separation or have separated. I'd take advantage of that because breaking up should obviously be the last resort...it's messy, expensive, sad and it'll set you back years financially. If you want to see how badly, check out figure 5 in this Stats NZ report on net wealth of New Zealanders and compare it with figure 4 depicting net wealth of two parented families. Depressing as hell.

2) How much does it cost to divorce?

It depends on how amicable the break up is and how the couple handles it. You can DIY divorce for as little as $175 or you can rack up a lawyer's bill in the hundreds of thousands. The average, from what I understand in NZ is $10,000-$15,000.

3) So what's the first step, assuming you've exhausted the make-up options?

If you were to ask a lawyer, they will say it's to talk to a lawyer. If there's a lot of money at stake, and the break up is acrimonious, this is probably a good move. If you're separating on good terms you'll probably want to sit down and work out what joint liabilities you have, on-going financial expenditures related to a household, child care arrangements, and division of assets. This will undoubtedly involve some long budgeting sessions. Sorted.org.nz has a guide for the newly separated which might be helpful.

4) What next?

Depending on how toxic, or friendly the separation is, some will opt to put a separation agreement in place. This is a contract laying out the terms of the separation, and can include:

  • the maintenance of one spouse or partner by the other
  • arrangements for day-to-day care of or contact with children of the relationship
  • financial arrangements for expenses
  • who will live in the couple’s home
  • how the relationship property will be divided

5) Is it legally binding?

It can be under certain circumstances. That is if it's in writing, if both parties have had independent legal advice, have signed it and its been witnessed by a solicitor.

6) 50/50?

By law, the courts dictate  a 50/50 division of assets. That's according to the Property (Relationship) Act. In the case of a separation, it's really up to the couples to decide how they want to carve up the family wealth but most would do it along a 50/50 split. Know your rights. Under some circumstances where an equal sharing of the wealth would be "repugnant to justice" courts can award a higher proportion of wealth to one party. 

7) Short end of the stick?

I would say this depends on your perspective, not your gender. That said, the research points strongly to women being left in a financially inferior position. Quite often that's to do with reduced earning capacity, prolonged absences from the workforce relating to child rearing, women taking the family home in exchange for other more appreciable assets, and women not having the equivalent retirement savings as their partners, again due to mothering. The fact remains that men continue to get paid more for the same job as women. In New Zealand the pay gap is around 9.6%.

8) Support

NZ is more generous than a lot of other countries in this regard. In addition to child support (in the case of the children staying with one parent), separated parents may be eligible for housing allowances, Working for Families tax credits, or possibly maintenance. 

9) How far do those benefits go to make up for potential financial losses?

The IRD uses a formula (based on the working parent's income) to determine child support. Depending on child care arrangements, and how much time they spend with each parent, it's possible the higher income earning parent will have to pay the lower earning parent to smooth out financial disparities. Seldom will these support payments compensate for the financial losses caused through divorce or separation. The Hollywood divorce settlement is hardly the norm.

10) Closure

By law, couples have one year from the time a marriage is dissolved by a court order to divide up the relationship property. The criteria for the continuation of benefits and subsidies depends on an individual's circumstances. If they re-partner for example, that will affect the equation. For more on what constitutes relationship property see the Law Society of New Zealand's website here.

Links for when the love dies:

http://www.stuff.co.nz/business/money/3249073/Divorce-a-financial-worry
http://www.howtolaw.co.nz/html/ml084.asp
http://www.netlawman.co.nz/info/divorce-separation-agreement.php
http://www.ird.govt.nz/wff-tax-credits/entitlement/who-qualifies/shared-care/
https://www.sorted.org.nz/life-events/separation
http://www.lawsociety.org.nz/home/for_the_public/how_can_we_help_you
http://online.wsj.com/article/SB10000872396390444025204577544951717564114.html?mod=e2tw

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

14 Comments

Something for everyone

Something for everyone today:
 
Inspiration - to be a better husband.
Thankfulness - that my wife is as forgiving and forebearing as she is.
Compassion - toward those on the journey.

Nice one. Thanks Ralph.  

Nice one. Thanks Ralph.
 

Yes...nice one

Yes...nice one Ralphie.......gosh.
 
I think my wife  has it well covered in the event of....
I notice she watches a lot of those perfect crime shows on the sky tele,......I'm thinking, I'm not gonna have to worry too much about the Divi up.

can relate to this hehe

can relate to this hehe

Thanks Amanda...   Any advice

Thanks Amanda...
 
Any advice on what to advise your kiddies before they partner up?

Well, my kids at both at an

Well, my kids at both at an age now where they claim to hate girls and one swears he'll never marry or have kids. Still, I tell them, when you are older do something you love for a living and marry (no compulsion there) your best friend. Quite often, their advice to me is shockingly smart. 

Yeesh, sounds messy,

Yeesh, sounds messy, difficult, expensive and emotionally challenging, the whole process.  
When you consider that these days half of marriages are ending in divorce, it makes you realise how many people there are out there who have had to deal with something really quite traumatic.
Good on you Amanda for being brave enough to be open and for sharing your experience to help others.  
Best hair yet as well, by the way.  :)  

Amanda interesting Stats NZ

Amanda interesting Stats NZ report, shame it is now is dated, eight years old. Found it interesting when you compare wealth to taxable income distribution at the time. Where did all the wealth accumulate from given declared income..all capital gain and inheritence? I think not.

Yes, sadly out of date

Yes, sadly out of date Speckles. They haven't updated those SoFIE reports in donkey's years. 
You might find this useful as well although its 2003/2004 data as well. I understand something more recent is in the works.
http://www.stats.govt.nz/browse_for_stats/people_and_communities/Familie...

I suspect the leading cause

I suspect the leading cause is not so much about money as it is about debt.

Easy solution; always marry

Easy solution; always marry someone richer than you are..  or someone has less debt than you have!
Doing the "due diligence" before sigining the contract.

Yes my business partner did

Yes my business partner did this, did well although a few extra dramas along the way.

We've got best friends going

We've got best friends going through separation right now and even though they want to try & avoid using a lawyer, it's painful, nasty and it's not gonna be cheap.
 
We have been asked to fulfill the role of "mediators" - it's anything but enjoyable and I'm glad that's not our full-time job. It's put me right off divorce (not that I was thinking about it). I might send the links you provide to them.