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case studies

Mark and Joanne

Mark was an English ex-pat who married Joanne while working in Australia and they are now separating. During their ten years together they had bought a home, a holiday home, and an investment property. Their home featured some impressive pieces of art. Joanne worked part-time as a hair dresser, earning $20,000 a year while Mark earned a salary of over £200,000 as an investment banker (which was converted to Australian dollars during the year) on top of his living away from home allowance. His superannuation went towards his UK pension fund.

Mark wanted to return home and for the sake of speed and simplicity, he offered their residential property to Joanne and she could keep the furniture and he would take the paintings. He offered to take the investment property and suggested they sell their holiday house to help balance the settlement 50/50. Mark also offered Joanne $400,000 cash to settle the difference between their superannuation balances.

Joanne didn’t want to keep the family home and felt pressured to accept a deal she wasn’t very comfortable with. Joanne’s lawyer referred her to an ipac adviser so she could understand the financial issues involved.  

Joanne’s adviser helped her work out her short-term money issues, and together they prepared a detailed budget (something Joanne dreaded doing).

With ipac’s help Joanne was able to complete the financial statements quickly and confidently. During this process she gained a good understanding of the workings of his employee share scheme, the implications of his superannuation being in the UK and recent changes to the Living Away From Home Allowance.

The paintings, Mark’s super and his long-term incentive scheme added over $2 million to the asset pool once they were valued. 

Joanne could confidently start looking for a new home – one which included a studio she could use for her hairdressing regulars. 

Katherine and Tom

Katherine and Tom are divorcing. Tom looked after the finances and had started a self managed super fund (SMSF) soon after they married 12 years ago. They have two children, aged eight and five. Tom started a small business delivering spring water bottles to businesses Australia-wide which had been successful and provided them with an income of $120,000 after tax each year. Tom established the business through his self managed super fund. They have a house worth $1,500,000 with a mortgage of $500,000. 

Katherine wasn’t sure what she was entitled to and Tom didn’t want to pay out her share of the business as this would mean selling the business. 

Katherine spoke to an ipac financial adviser who was able to talk her through her various options. He helped her work out her expected living expenses, as she wanted their children to live with her. They estimated she would need $600-$700 per week.  

After consulting with her lawyer on the likely split of assets, the ipac adviser modelled a range of options and was able to
show Katherine:

  • the difference in real terms of a 60/40 split compared with a 70/30 split
  • the impact of different ways of splitting the assets including selling the business
  • the impact of keeping the family home compared with downsizing, and
  • the impact of making different superannuation investment choices.

He was able to highlight by keeping a share in her husband’s business she was taking on more risk than she fully realised. By taking control of her super she could manage this money on her own terms.

Katherine felt better able to instruct her lawyer. Tom was able to keep the business and the SMSF. Katherine bough a new house and was able to keep looking after her children in their new home. And the divorce remained amicable. 

Liz and Ted

Liz and Ted were divorcing after 25 years of marriage. Both are in their late fifties and their children have grown up. They have a three-bedroom family home worth $800,000, a holiday home worth $400,000 and a self-managed super fund with $600,000. Liz hadn’t worked for a long time and was unsure about re-entering the workforce. She wasn’t confident about what she could expect in the divorce. But she did want to stay in the family home.

Liz’s lawyer suggested she talk to an ipac financial adviser. He was able to listen to her preferred options and work through some estimates of her living costs. He was able to come back to her in a second meeting and present a series of scenarios:

Scenario 1: (60/40) Liz keeps the family home, Ted keeps the superannuation and they sell the holiday house. Liz would need to live off her share of the holiday home proceeds ($280,000).

Scenario 2:
(60/40) As above, with Liz selling the family home in five years and downsizing to a smaller house. 

Scenario 3: (60/40 split) Sell the family home and the holiday house now, and Liz taking a half-share in the superannuation. 

Scenario 4:
(50/50 split) As above, with Liz taking a smaller share of the superannuation. 

These were all modelled using Liz’s assumptions she could live on $40,000 or $60,000 a year, giving Liz eight different scenarios to consider. And each one highlighted how long her money would last.

The adviser showed Liz if she diverted as much of her money into super as possible and draws a transition to retirement pension – which is tax-free after age 60 – her financial position improved. If she relinquished the family home, and downsized sooner rather than in five years, she could extend her available funds beyond her life expectancy. This also meant selling costs would be shared rather than shouldered by Liz alone. 

This changed Liz’s expectations of staying in the family home, and allowed her to start looking at properties in a realistic price range. More importantly, it gave Liz more confidence about her future, her retirement and she could leave something for her children. And she knew she could achieve this by keeping her adviser to help her stay on track.

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