What is a Fair Property Settlement?
If you have recently separated, there is a pathway to help you and your ex-partner sort out your assets and liabilities
The right lawyer can help you quickly and efficiently 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:
Identify and value the assets and liabilities of the relationship
You and your partner should include all 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.
Identify each person’s contributions during the relationship
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).
When determining what is a just and equitable settlement proposal, consideration must be given to each person’s contributions.
While contributions as parent and home-maker are usually equally as valuable as the wages of the working partner, it is not always that straightforward. There can be certain circumstances where financial contributions to a marriage should be given significantly more or less weight. A family lawyer can help you consider and address those circumstances.
Consider the future needs of both parties
When people separate, they are often in very different financial circumstances. You or your ex-partner may also have other factors that a family law can identify, such as career opportunities, health complications, ongoing care of dependents, and potential financial resources.
Determine an appropriate adjustment (if any) to the property interests of both parties
based on the above factors your family lawyer can advise you about what a fair settlement will look like, and help you negotiate a settlement with your ex-partner.
If both parties have an understanding of what the Court will consider just and equitable, then an amicable settlement can be reached without costly Court litigation.
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 process for determining what is just and equitable could be ignored in certain circumstances. 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, no matter the value of the parties’ assets, the parties future needs, or the contributions made. 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.
What is spousal maintenance?
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.
