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Cracking the Egg

We work all our lives to create a nest-egg that will hopefully sustain us comfortably in our retirement, and in this day and age most of us jealously consider our superannuation investments to be our own precious, private nest-egg. To some extent it’s true. Superannuation funds are held in trust, and therefore they can’t generally be attacked by creditors, even a bankruptcy situation. But that doesn’t mean they are unassailable.

Many of my Family Law clients facing matrimonial property settlements wrongly assume their superannuation is locked away and can’t be carved up as part of the property settlement. I’m afraid it’s just not true. In the event of a relationship breakdown, all assets owned by both parties, including money held in super, must be identified and valued as part of the joint property pool, to be divided up between the parties, regardless of when it was acquired.

For the purposes of a property settlement, spouses have the option of taking their respective superannuation entitlements into account in the property settlement, by leaving them untouched and accounting to their spouse for their value from other assets, or alternatively by splitting the superannuation interest via a ‘payment split’. The most appropriate option will depend on the particular circumstances of each case. If it is convenient to make use of a payment split to effect property settlement then the superannuation of one spouse will be split so as to transfer part of that spouse’s superannuation into a superannuation fund in the name of the other spouse.

Before assessing whether or not you will be required to share your superannuation with your spouse for the purposes of a property settlement, it is essential to identify the nature and type of the superannuation interest you have, and its value. Once this is done, you are able to examine the effect of any proposed settlement and the likely consequences of any superannuation split, and decide whether or not it is in your best interest to make a payment split.

Either way, when you come to the property settlement table in Family Law proceedings, inevitably the whole nest egg will certainly be cracked.

Read more on the Nyst Legal blog

Money Car House

What would you give up to be rich?

Would you live in a tiny shoebox apartment for 10 years, if it meant you would never have to work again afterwards?

What about transport – would you give up your car, and instead travel by bus or bike for a decade, in an effort to save every penny and build your wealth?

That’s what couple Jeremy and Winnie did.

They spent 10 years living frugally and now, aged in their 30s, they’re effectively retired and living off their investment income.

They say they lived in a small apartment in an old building, sold their car, rarely ate out and minimised spending wherever possible, which allowed them to “save a large percentage of our income”.

They were earning a respectable US$135k between them (around AU$185,000 at the current exchange rate), so they were able to invest a decent six-figure sum into the stock market.

Repeat that process every year for 10 years, and that’s well over a million bucks they invested into their early retirement.

“Instead of buying things and services, we learned new skills that reduced our expenses even further. By learning to invest, we turned those savings into a respectable income stream. Now still in our 30’s, instead of 2 weeks of vacation a year, we have 52,” they share.

Now, they spend their days travelling the world with their baby son, living on dividends of AU$5,500 ($US4000) a month.

It sounds great and all, and it probably beats working in an office job you detest.

But I have to say, their journey is not for me.

I mean, seriously: who wants to live off two-minute noodles and catch the bus to work, while darning their own socks and declining after-work drinks to save pennies for a decade?

And all so they could live off a fairly ordinary income stream of $5k per month in ‘retirement’?

That ain’t retiring rich; that’s retiring ordinary.

Plus, it’s got to be said: any retirement strategy that involves travelling on the regular with an infant is flawed. Travelling first class with a nanny and staying in five-star hotels? Well, now you’ve got my attention…

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