Working out your property split - it’s complicated

1 Nov

Recently separated, and want to know how to negotiate a fair property split?

Here’s some helpful information about Family Law property settlements.

So you've separated, and all your friends are telling you horror stories of people they know who lost everything to their bitter ex. But what is the likely outcome?

When couples separate, issues relating to parenting and property are governed by the Family Law Act 1975. Of course, the Act is a bit vague and unfortunately doesn't provide a clear mathematical formula for working out what's "fair" (or, in the words of the Act, what's just and equitable). There is however, heaps of case law (previous decisions made by the Courts about property settlement matters) that gives guidance to experienced lawyers about what you can expect, and what you and your ex-partner should agree to, to avoid lengthy and expensive Court proceedings. For this reason, it's important you speak to a lawyer as soon as possible and get some good advice. Don't be afraid to talk to more than one lawyer: if you get a "bad vibe" from a lawyer, there's probably a good reason. Be prepared to have a chat with another lawyer. It's important, if you do have to engage a lawyer to act for you, that you engage a lawyer who you trust will give you the best possible outcome.

The first consideration is whether the Court would be minded to use its discretion to make any orders in the first place. It is not mandatory that the Court does make orders about your property, and there have been some cases where the Court has decided not to make any orders even though one party wants orders made (for more information about this, see the High Court decision of Stanford & Stanford [2012] HCA 52).

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 children, 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.

Where parties to a relationship have had a relatively long relationship, or have intermingled their assets or have made both financial and non-financial contributions (for example, where one party has given up their career to look after children), the Court will usually apply a ‘four-step’ approach to working out how property should be divided:

STEP 1: Before any negotiations can take place, it is important to identify and value all the assets and liabilities of a relationship, irrespective of who legally "owns" them. Property is given a very wide meaning by the Court, and includes shares, businesses, superannuation, and loans, as well as ordinary property such as houses, investment properties, cars, furniture, jewellery, and cash in the bank. When determining the value of property, particularly things like cars and furniture, the value should be agreed having regard to what the item could reasonably be sold for "to a prudent buyer". In other words, the value is not what it cost you, but what you can sell it for second-hand. If parties cannot agree on a value, then it may be reasonable to get the property independently valued. Lawyers will refer to all the assets and liabilities as "the property pool."

STEP 2: Consider the contributions made by each of the parties to the property that is in the property pool. Any adjustment to the property must be based on the contributions each party made. Contributions include financial contributions (for example wages, inheritances, and compensation), non-financial contributions (for example renovations) and contributions to the welfare of the family (for example care of children and home). Contrary to popular belief, there is not hard-and-fast rule that the "starting point" for property division is 50/50.

STEP 3: Consider the future needs of both parties, including the age, state of health, earning capacity, and responsibilities with regards to the future care of children.

STEP 4: Determine an appropriate adjustment to the property pool, based on the factors set out in steps 2 and 3 (contributions and future needs). The Court will consider, in an overall assessment, whether the adjustments to be made and the orders being contemplated are just and equitable in all the circumstances.

When lawyers negotiate an appropriate property division in an effort to resolve issues amicably, prior to initiating costly and time-consuming court action, the above process is usually adopted. Of course, there is rarely a situation where the parties agree on all the issues in relation to contributions and future needs, and this is why you should have an experience lawyer advise you in this process. For more information about just and equitable property settlement, see the Family Court decisions of Hickey & Hickey & Attorney-General for the Commonwealth of Australia [2003] FamCA 395, and Bevan & Bevan [2013] FamCAFC 116.