Dividing your hard-earned property following separation can be emotionally exhausting. Having clear advice about your options and a considered strategy for achieving your goal brings certainty and confidence. While every case is different, at Empower Family Law and Mediation we have the experience to provide you with realistic and strategic advice about your property and spousal maintenance entitlements.
The outcome in each case will be different depending on the facts and circumstances of the case. The Australian Family Law Act 1975 sets out a number of steps to be taken into account in determining how the assets of a separated couple should be divided.
In general, the steps involve:
- Identifying and valuing all of the assets, financial resources and debts of the parties. Each party is required to disclose their financial circumstances. Where the value of any asset is uncertain, or if the parties do not agree on the value, an expert valuation is sought.
- Assessing the contributions each party has made toward the acquisition of the assets. ‘Contributions’ is defined to include both financial and non-financial contributions. Non-financial contributions include contributions as a homemaker and parent. Home maker and parent contributions are generally given the same weight as contributions made by way of income.
- A consideration of the ‘future needs’ factors set out in section 75(2) of the Australian Family Law Act 1975. These include factors which may affect a party’s financial future, such as their age or state of health, discrepancies in income, earning potential or expenses associated with caring for children.
- An overall examination of the findings to determine whether the overall result is "just and equitable" in all the circumstances.
What if I had significant assets at the start of our relationship?
The assets, including property, investments, shares and savings each party brought to the relationship will be taken in to account in assessing their respective contributions. Where one party’s contributions t the commencement of the relationship have been significant, for example where they have provided a springboard from which to extend a couple’s asset base, they may impact the overall division of assets following separation.
However, in general less weight is given to initial asset contributions the longer a relationship continues. In the case of Bremner & Bremner the Full Court stated, “an initial substantial contribution by one party may be ‘eroded’ to a greater or lesser extent by the later contributions of the other party even though those later contributions do not necessarily at any particular point outstrip those of the other party”.
Put simply, the weight to be given to an initial contribution may turn on a number of factors and professional advice should be sought before any agreement is reached.
What if my family helped us out along the way?
As property prices rise it is increasingly common for couples to receive family help along the way, this help can include:
- A lump sum amount to assist with a property purchase.
- Periodic sums to help with living expenses.
- Rent free accommodation to help parties to save.
- Loans.
- Security for loans.
- Trust distributions.
- Assistance with school fees.
Following separation, it is important to tease out the nature of these contributions and to figure out what weight should be attached to them. In assessing contributions made on behalf of one party, the following factors are relevant:
- Whether the contribution was a gift or a loan.
- How much was contributed.
- How the funds were contributed (for example, directly to one party or to a joint account?).
- At what point during the relationship was the contribution made?
- Was there a loan agreement or mortgage executed between the parties and the family members providing the assistance?
In generally, financial assistance rendered to a couple will be considered to have been intended to benefit the party to whom the family providing the assistance is related and may ultimately increase the share of property that party receives at settlement.
Parties who receive financial assistance from family members should consider:
- Executing a loan agreement requiring regular repayment or a mortgage if the funds are a loan to be repaid.
- Documenting the receipt of the funds and how and when they were spent.
- Executing a Financial Agreement which takes account of the financial assistance.
How can I reach agreement with my ex-partner?
The Federal Circuit and Family Court of Australia encourages parties to reach agreement between themselves wherever possible. In most cases, with the assistance of their lawyers, parties can agree by negotiation or will attend a mediation to decide how to divide their property. If parties cannot agree, they can bring an application for orders dividing their property, either within 12 months of a divorce being granted if the parties were married, or within 2 years of separation if the parties were in a de facto relationship.
Regardless of how you agree the division of your assets, the following points are vital:
- You and your ex-partner have a duty to disclose all documents relevant to your financial circumstances during your negotiations. You should insist on the opportunity to review those documents and satisfy yourself that your ex-partner is not seeking to hide assets or income.
- You should seek independent legal advice from a family lawyer before you sign any settlement documents.
- You must formalise your settlement agreement by way of either a consent order sealed by the Federal Circuit and Family Court of Australia or a binding Financial Agreement. There have been many cases where informal settlements have been re-opened and litigated years later, usually at great expense to both parties.
- You should revisit your Will, Powers of Attorney and the nominated beneficiaries on your superannuation fund to ensure they are consistent with your property division and your current wishes.
- You should not base your settlement agreement or your expectation of how your property should be divided on BBQ conversations. Every case is unique, and the settlement must be tailored to the circumstances.
Why do I need to formalise my settlement?
Clients often baulk at the expense of formalising a settlement. If a settlement has been reached amicably, they may feel that seeking to formalise the agreement will upset or insult their ex-partner. Some clients are simply exhausted and want to wrap things up as quickly as possible.
However, it is critical to formalise an agreement by either consent orders or a financial agreement. Here’s why:
- The other party may not follow through with the agreement.
- An agreement that has not been documented in accordance with the requirements of the Act is neither binding nor enforceable.
- Superannuation entitlements cannot be split unless there is a formal agreement which extends ‘procedural fairness’ to the trustee of the fund.
- Even after parties separate their finances, either party could apply to the court later for a further adjustment. Any additional assets, liabilities or superannuation that either party accrues following an informal settlement will be included in the asset pool.
- Litigation that arises after an informal separation will place financial and emotional stress on new relationships.
- Litigation that arises after an informal separation will almost definitely be more costly and stressful than properly formalising an agreement will be.
- Unless an agreement is carefully drafted, both parties may remain liable for joint debts. If one party does not maintain their obligations, there is nothing to stop the creditor from requiring the other party to meet the outstanding obligations.
At Empower Family Law and Mediation we understand you have worked hard to build your assets. We are experts at providing strategic advice on your options which is calculated to ensure you receive your full entitlements. We will keep you informed every step of the way, and we will be clear on your legal costs.
From your very first conference with us you will know where you stand, what your options are and what to expect.
That is why your first 30-minute consultation with us is FREE.