No matter your life circumstances, navigating the financial aspects of a divorce can be challenging, particularly when emotions are running high. However, there can be several added layers of complexity for those residing overseas. Here are our tips for managing finances and divorce as an expat.
#1 Speak with a divorce attorney who understands the local jurisdiction/s ASAP
Of course, the first thing to do is get legal advice from a divorce attorney who understands the divorce laws in the country in which you reside. This is critical in helping to ensure you receive a fair financial settlement.
In addition, if you and your spouse now reside in different countries, it’s essential to understand the requirements in both jurisdictions. There may be the possibility of arranging divorce proceedings in a jurisdiction that may provide a more favourable outcome.
#2 Consider whether you intend to return home
Whether you continue living in a foreign country following a relationship breakdown isn’t always a straightforward decision. Still, it needs to be considered early, particularly if your residency status is dependent on your relationship.
If this is the case, you may no longer be eligible to remain in the country. If you wish to stay, you may need to pursue a new visa, so it’s critical to speak to a qualified immigration lawyer. In most countries, there is a grace period to allow you to apply for a new visa or prepare for your departure, but it’s essential to understand your rights and responsibilities.
Of course, divorce is rarely an easy time, so returning home to family and friends can be an attractive option regardless of your immigration status. Understanding whether and when you intend to return home can help you make the best lifestyle and financial moves from the outset.
#3 Reset your financial goals and plans
In most cases, we set financial and life goals with our spouses believing the relationship will continue, so if it ends, it’s vital to revisit and reset these for changing circumstances.
Speaking to a financial adviser is critical. The right adviser can help you understand your new financial position and set appropriate goals to keep your finances on track. The divorce settlement will likely involve an asset split, and it’s important to understand how different outcomes will impact your financial position, lifestyle and goals.
Doing this before a settlement is agreed upon can help you equalise the settlement to best suit your plans and goals. For instance, if you will be moving back home, maintaining foreign pensions or assets may become complicated, so you may look to negotiate an asset settlement that betters fits your new life and future goals.
#4 Avoid currency exchange where possible
While it’s best to avoid currency exchange as part of any settlement, it’s not always possible, so it’s essential to understand how currency fluctuation could impact any proposed arrangements. Speaking to your lawyer and financial adviser (even better if the two will work together) to understand how you may be impacted and how you can achieve the best possible outcomes is a must.
#5 Understand the tax implications of any proposed settlement
Determining the tax implications of any asset split can be considerably more complex for an expat as there may be two tax jurisdictions to consider.
You need to be aware of taxes on the sale or transfer of any assets overseas if you and/or your partner are tax residents of (or hold assets in) another country. In addition, whether you sell or merely transfer assets can have a significant impact on tax implications, so it’s important to understand the tax treatment of asset distribution before a settlement is reached. This will vary depending on where the asset is held and where you and/or your spouse are tax residents, so it’s essential to get advice from professionals who understand both jurisdictions.
There may be exemptions or rule changes that apply to divorce settlements in some cases. For example, non-residents may no longer be exempt from paying capital gains tax when selling the family home in Australia. However, those selling the former Australian family home for a divorce settlement may avoid CGT under the ‘life events’ exclusion. In the US, CGT won’t typically apply to assets transferred as part of a divorce settlement, but this exemption may not apply if you are no longer a resident at the time of transfer.
#6 Get expert advice
With so many areas to consider at a time when emotions can be significantly heightened, it makes sense for expats to seek expert advice.
Working with divorce and immigration lawyers, tax professionals and financial planners who understand both jurisdictions can be incredibly beneficial. Look for professionals who are happy to collaborate to ensure you achieve the best possible lifestyle and financial outcomes.
Apt Wealth Partners specialises in financial planning for expats, helping you stay on track with your financial plans and goals, no matter where life takes you. You can read more tips and advice for expats here or get in touch with the team to organise a time to discuss your personal circumstances, plans and goals.
General Advice warning
The information provided in this blog does not constitute ﬁnancial product advice or a recommendation to purchase a particular product. The information is of a general nature only and does not take into account your individual objectives, ﬁnancial situation or needs. It should not be used, relied upon, or treated as a substitute for speciﬁc professional advice. Apt Wealth Partners Pty Ltd is not a registered Tax Agent. You should consider your individual situation and seek tax advice from a registered tax agent before making any decision based on the content of this document. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.