As a GP, long hours and struggling to maintain work-life balance may be something you’re quite familiar with – particularly if you’re a practice owner.
The demands of your job can place strain on the relationships in your life, which is why the divorce rate among doctors is amongst the highest. The financial settlement after a divorce or a relationship dissolution for a doctor can be an especially stressful and confusing time with the financial impact lasting for decades.
Knowing the steps to take to protect yourself and your practice may enable you to ease some of the financial burden and stress involved during this challenging period.
Record your separation date and complete a financial stock take
To understand what you own together and the steps to take during the divorce process, list and value your assets (including your home, car, furniture, super, investments and joint debts). As you are working through this process, collect all relevant documents and store them safely. This includes personal and financial documents such as your marriage certificate and bank account statements.
Consider changing your PINs and passwords for your email and online banking even if the separation is amicable.
Review and update your personal and professional accounts and paperwork
Update your insurances
Review your insurance requirements and policies for your car, home and personal insurances such as income protection, trauma and life insurance – especially if you have dependants. An insurance specialist will be able to assist during this time to make sure benefits are going where you want them to be paid and you have appropriate levels of cover in place as your circumstances change.
Extend the review to your private health insurance ensuring there are no gaps or lapses in cover to avoid incurring a pro rata Medicare Levy Surcharge.
Don’t forget your estate planning
Another important consideration for GPs going through a separation is estate planning. A divorce can take time to finalise and during this lengthy process, it is not uncommon for one party to find a new partner. This can cause problems when an existing will stipulates all benefits should be paid to the soon-to-be ex partner.
Important legal documents to be reviewed during this step include:
- Trust deeds (specifically definition of beneficiaries)
- Powers of attorney; and
- Superannuation beneficiary nominations.
Review loans and banking
If your accounts including credit cards are in joint names while you are in a relationship, you may need to discuss how these are managed moving forwards. Depending on your circumstances, you may need to consider whether existing ownership agreements remain appropriate, which can include arrangements on:
- Joint bank accounts
- Joint credit cards
- Overdraw facilities on accounts; and
- Agreements, loans and bills that aren’t a joint responsibility.
Ensure protection of your medical practice
As a GP, protecting your business asset will be a major concern, but the way you structure your private practice can help with this. There are a number of options relating to business structures that are effective in minimising exposure to personal assets including business assets, trademarks and risks incurred with running a medical practice.
Get advice around the division of your assets
Unlike a formal divorce, GPs who are married or have a de facto partner may formalise a division of their assets (commonly known as a property settlement) at any time following separation.
A number of relevant factors such as each spouse’s contributions and needs are considered and weighed up to determine a fair property settlement. Being aware of tax implications such as Capital Gains Tax (CGT) is essential when dividing or transferring assets. It’s not always as simple as dividing assets 50/50 and it is recommended you consult with your accountant and financial adviser before starting this process. They will be able to identify potential issues both parties may face and make recommendations around what is proposed.
Account for potential spousal maintenance
In Australia, one spouse may be required to provide financial support to the other spouse in addition to, or pending, a property settlement. Spousal maintenance is distinct from property settlement and child support.
Take into consideration parenting arrangements including child support
Child support is again separate from property settlement and spousal maintenance. It relates to periodic and non-periodic payments made for the benefit of a child or children. Parenting arrangements between separated couples can (and do) impact upon the financial positions of the spouses post separation. Such arrangements are highly relevant to each of property settlement, spousal maintenance and child support.
Once finalised, child support payments will need to be included in your income tax return. It can impact several items including: HECS/HELP repayments, Medicare Levy Surcharge, entitlement to Private Health Insurance government rebates and Centrelink benefits.
Other factors general practitioners should consider during a divorce settlement
Family trust assets and unpaid entitlements
Have a lawyer (someone who knows the medical sector) examine the financial accounts of any family trusts in place in order to determine whether any legal entitlements will need to be paid as part of a settlement.
Tax considerations for shared investments
Income (or use of losses) resulting from shared investments such as rental properties, will continue to be apportioned until there has been a legal change or transfer of asset ownership.
Updating your budget and financial plan
Your circumstances, and potentially your income, may change considerably during this time so it’s a good idea to review your budget and wealth strategy for the future. Your accountant and financial planner will be able to help you with this and ensure you factor in all of the relevant considerations.
What comes next?
If your situation is such that this information proves timely or valuable to you, you may be interested in knowing more on this topic. DPM has developed A GP’s guide to divorce/separation.
Alternatively, for a more in-depth chat about your personal circumstances, book a consultation with one of our medical financial specialists who will ensure in the unlikely event of the dissolution of your relationship, your interests are protected.
Disclaimer: The information contained in this site is general and is not intended to serve as advice. DPM Financial Services Group recommends you obtain advice concerning specific matters before making a decision.
Will Carison is a chartered accountant and medical tax advice specialist.