When people separate they need to sort out a property settlement.
If substantial assets are owned in the name of the other spouse then steps may need to be taken to stop those assets ‘disappearing’. For example, a court order could be obtained to restrain the sole owner of real estate from dealing with the real estate (possibly supported by an order allowing a caveat to be lodged on title).
Also, assets may be in the joint names of the parties but either party can access. Once again, steps may need to be taken to stop that asset disappearing. For example, a bank account in joint names with either party to operate could be changed to an account requiring both parties to operate.
One asset which is sometimes overlooked is super. Can it disappear?
The short answer is yes.
If the other spouse is able to access their super (or is approaching the time when they can access their super) then you may want their super to be “flagged”. The “flag” will prevent the fund paying any money to the member.
Once there is a settlement agreement or court orders then the “flag” can be lifted. If the settlement involves a super splitting order then this can then be implemented.
An important question is, at what point can a person access their super?
The following are the main situations in which a person can access their super and what you might do about it:
- They have unrestricted non-preserved benefits. These can be withdrawn at any time. So, if the benefits are substantial then you may want to immediately have the super “flagged”. Also, keep an eye out for restricted non-preserved benefits as it is possible that these can turn into unrestricted non-preserved benefits and then be withdrawn at any time.
- They are totally and permanently disabled. You may want to immediately have the super “flagged”.
- They are 65 years old (or older). If the person is approaching 65 or is already 65 or older then you may want to immediately have their super “flagged”.
- They have reached their preservation age and they are retired. If they were born before 1/7/60 their preservation age is 55. If they were born after 1/7/64 their preservation age is 60. There is an increasing scale in between. So, if the person is approaching their preservation age then you may wish to have their super “flagged” (as you never know when they are going to retire).
If the super is in a retail or industry fund then you can be confident (hopefully!) that the fund trustee will abide by the “flag”.
What about with a self managed super fund (SMSF)? You can have the super “flagged”. But, this is just a piece of paper. In a SMSF the members will be trustees (or directors of a corporate trustee) and have the power to do things such as withdraw money from a bank account. So, you may need more protection than a “flag”. For example, you may need to make the bank account operational by both parties needing to sign. Otherwise the other member could withdraw the funds and disappear with them.
The bottom line…in a property settlement you want to get your fair share of the assets…part of that is making sure that at the end of the day the assets are there to divide!