It’s said that grey divorce is on the rise. Around a quarter of divorces are marriages that were twenty years or longer. Thirty years ago, it was around one in five marriages. And while it might not be a huge difference, there’s one thing that has changed since the 90’s. Wealth. There’s a lot more wealth in housing and superannuation than there was back in the 90’s.
While a divorce earlier in life might potentially be ruinous, later in life there’s usually more of an asset base there. A house, superannuation, and other investments. In some cases, it won’t be luxury, in other cases it certainly will. Either way, it splits and in one aspect it’s somewhat similar to the passing of a partner. One person now has full accountability for their life and the assets they are left with.
What comes next is up to the person. One of the options, whether divorced or widowed, is whether they head down the relationship path again in the future. Some people will never pursue one again. Some people may take their time. Some people may get straight back out there.
For those who choose to pursue relationships later in life, it’s those who were divorced that may be more circumspect after a brush with lawyers and the division of assets. While those who are widowed may be less hesitant and more willing to engage, without much experience. Either way, a relationship later in life, with the potential for cross mingling of asset bases, and children looking on from either side, can be an interesting prospect with many implications to be considered.
Firstly, the status of the relationship may not always be defined. This is understandable. People may be a little bit cagey about admitting to friends, family or even their financial adviser about what’s going on. They may just assume there’s nothing much to admit to. The problem is someone might not be defining something in their head, but the law might be defining it for them.
Things that might turn it into a de facto relationship?
How long have the pair been in a relationship?
Is it a “friends with benefits” relationship?
Is there a shared residence?
What’s the extent of any financial dependence or interdependence?
Is there a mutual commitment to a shared life? Do the partners share household responsibilities, live together, and have a commitment to the future?
All this is important because what else needs to be defined? Some people assume they’ll be more level-headed about things and “what’s mine is mine and what’s yours is yours”. This might be fine if everyone has somewhere to live if the relationship ceases to exist. However, if one party has a house and the couple live there, or the other party has sold off assets and things have started to intermingle with boats and caravans etc What happens if the homeowner passes away and there’s kids in the background?
When resources have come from different family sides and they’ve blended into a shared pool, often children are still accounting in their mind for what they feel they have a claim on. This can be messy. How does someone maintain their quality of life and standards of living when the assets are currently shared, but there’s other intentions for them in death?
We’ve seen many interesting changes and developments in these types of scenarios. In some cases a quite wealthy individual has a live in partner, and the person assumes “well she can have a few things if I pass” but she’s actually entitled to a lot more given the time spent together.
In other cases, everything is hunky dory for years, everyone assumes everything is fine and will continue to be fine, then at a family get together, some words are exchanged between one partner and the other partner’s children. The reality changes very quickly.
While unwanted, this type of development isn’t such a bad thing. It makes it crystal clear that estate planning needs to be readdressed. Any assumptions that this partner and the other partner’s children can work together in the event of a death are removed.
Partner A owned a house which Partner B lived in. The couple had a joint investment account, but Partner B also had a caravan and the 4WD for towing, that both partners travelled around in. Partner B also had six figures in the bank. In this instance it was in Partner A’s will that the house was to go to Partner A’s children, but Partner B could live there so he had a roof over his head.
The last thing someone older wants is no security and to be in dispute over assets. The children were removed from any estate planning duties because the children and Partner B were meant to work together on estate issues in the event Partner A passed. Not likely to happen.
Partner B was already protected by a life tenancy agreement. It may not be perfect, and it doesn’t solve conflict, but Partner B has somewhere to live, and they also have obligations to keep the property in a liveable state.
The questions for people when new relationships form, and assets blend together:
Is the friend actually a de facto?
Do the children get on well with the new partner?
Who thinks they own what?
Are debts weighing on the next generation raising expectations and need?
Defining a relationship may seen as an issue for teenagers, but it’s something older people need to get around to sooner, rather than later. Advisers also need to coax out these details because it’s an opportunity to provide some valuable context. It can help protect each others’ interests, family interests and ensure there are fewer surprises.
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
