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Family Law - Property settlement after separation
The basics
When you and your partner separate, whether you were married or de facto and whether or not you have children, you will need to sort out your financial affairs including determining who keeps what. For example, you and your ex-partner may have superannuation, own motor vehicles or even a house, and you may also have debts including a joint mortgage, credit cards, and personal loans. Often during a relationship, some assets may have been bought (or accrued) in one person's sole name, and it would be unfair for the parties to keep what they now have at separation. It is important, when you separate, to talk to a lawyer so you are fully informed about how you can also fairly divide your financial matters and your assets and liabilities. If you don't, then you may end up losing an unfair percentage of the the wealth created during your relationship.
The details
The right lawyer can help you quickly and cheaply sort out your property matters when you separate. There are a number of hidden traps and dangers if you do not get the right advice early, including the risk that some assets and liabilities won't be properly accounted for, and one or the other side will end up without a fair settlement.
When negotiating a property settlement with your ex-partner, things that need to be taken into account include whether one of the parties made significant financial contributions to the assets (including contributions made before the relationship started, during the relationship, and in some circumstances since the relationship ended), whether the other partner also worked, or was financially supported at home and cared for family, the ability of both parties to find work after separation. Other factors can also play a big part in working out what is fair, including family inheritances, work injuries, physical and mental health of the parties, whether one or both parties have started a new relationship with someone else, and the future care of children.
Historically, where parties have shared a relatively long relationship, or have intermingled their assets or have made both financial and non-financial contributions (such as looking after children), the Family Court has applied a ‘four-step’ approach to working out how property should be divided:
Step 1: Identify and value the assets and liabilities of a relationship, irrespective of who legally owns them or has control of them. Property is given a very wide meaning by the Court and includes shares, business interests, superannuation, and trusts. Often, the parties’ superannuation interests are divided into a separate property pool, to avoid an unfair outcome where one party retains a significantly greater portion of the current assets (e.g. cars, a house, or cash) while the other party receives a significantly greater portion of superannuation which may not become a usable asset for many years.
Step 2: Consider each parties’ contributions to the current assets. Contributions include financial contributions (for example wages, inheritances, and compensation), and non-financial contributions (for example spending time making renovations, contributions to the welfare of the family including care of children and the home).
Step 3: Consider the future needs of both parties, including the age, health, earning capacity, and responsibilities with regards to the future care of children.
Step 4: Determine an appropriate adjustment to the property interests of both parties (as identified in step 1), based on the factors set out in steps 2 and 3. The Court will then consider whether the settlement being contemplated, after following the steps set out above, are just and equitable in all the circumstances.
More recently, however, the Court has taken a less proscriptive approach. In the 2012 family law decision of Stanford & Stanford the High court of Australia determined that, in some cases at least, the above 4-step process could be ignored. The Court made the point that its power to make changes to the property of separating couples was discretionary: in some circumstances (like the circumstances in Stanford), it was not appropriate to make any property adjustment. Where parties have kept their financial affairs relatively separate, and there are relatively few shared assets or the relationship has been relatively short and there are no dependents, negotiations about how shared assets should be divided can instead be made on an ‘asset-by-asset’ approach. This approach means that agreements or orders dealing with the division of property is limited only to those assets in which the parties have a shared interest, and are divided primarily on the basis of each party’s contribution to each particular asset.
In certain circumstances, the Courts may make orders that require one party to give to the other party either ongoing payments, or a lump sum payment, if one of the parties lacks sufficient income or resources to pay their own living expenses. These orders can be made, for example, until the property dispute is finally determined at a hearing, or on a final basis as part of an overall settlement. To be eligible for spousal maintenance, the low-income earner must be unable to support themselves by reason of either:
- Having the care or control of children of the marriage who are under 18 years of age;
- By reason of age or physical or mental incapacity for appropriate gainful employment; or
- For any other adequate reason (with the adequacy of the reason to be decided by the Court).
There is no formula to apply in determining the amount of spousal maintenance payable. This is a matter for the discretion of the Court, but it is broadly calculated using a two-step test. In summary, the low-income earner must demonstrate that:
- They have a shortfall from their income (excluding any government benefits) to meet their reasonable financial needs; and
- The high-income earner has the financial capacity to meet that need from their income or other resources at their disposal.
Each situation is different, and even if you and your ex-partner are completely amicable it is worth engaging a lwyer to help you make sure everything is binding and fair. Please contact us for a free, confidential chat about your situation.