If you have separated, or plan to do so, you will need to finalise the financial matters.
Sometimes the separation is cordial and the parties agree on the separation of assets quickly. However, quite often the asset split is complex or the parties cannot agree – and there can be good reasons for parties taking a particular view.
If you agree on how your family property is to be divided, it is common for parties to either:
To do nothing, may mean that both former partners are left open to a later claim by the other – hence it is usually best to address the financial issues promptly post-separation.
A binding financial agreement is an agreement which covers the division of property, superannuation and if required, spousal maintenance. This can be a very cost and time effective method to formalise how the parties want to divide the assets. Consent orders require a more detailed assessment of the assets and the future needs of the parties. As a general rule, they have a higher degree of enforceability.
In any case, if you have been in a de facto relationship at the time of separation, you need to address these matters within two years of separation. If you have been married, you must do so within 12 months after your divorce.
Legal advice can help you determine what you might be entitled to. Sometimes parties are surprised by what they should receive, as opposed to how much their former partner or spouse is suggesting they should agree to.
If the matter goes to Court, the division of assets must be assessed and determined to be “just and equitable”. It is important to remember that what one sees as fair, may not be how a court sees it. Hence, we consider that it is smart to assess at the start what may be the likely division of assets awarded by a court and use that as a basis for providing advice as to what is a likely outcome – and then, if possible, try to achieve that outcome with minimal (or in some cases no) court involvement.
The criteria in Australia that will determine a party’s claim to financial assets are as follows:
The asset pool will be comprised of everything that the parties own. All real estate, shares, trust assets, businesses, cars, boats, tools, jewellery, cash etc will form part of the asset pool. Some things are incidental, such as personal effects, but even these things may still have a value and are therefore included.
It does not matter whose name these assets are in. The Family Law Act cuts across all legal entities and captures everything in which the parties have an interest. Other interests, for example where the “asset” is not in either parties name but they have a beneficial interest in the asset (also known as constructive trust) may also be included. Sometimes when clients first come to see us, they are worried that “nothing is in their name”. However, the truth is that it really does not matter when working out the value of the estate, which must eventually be split on a percentage basis.
Both financial and non-financial contributions to the relationship and the property of the relationship are relevant. The law acknowledges that different parties bring different amounts of money and assets to a relationship. As a general rule, the longer the parties are together, the less relevant the assets that the parties owned prior to the relationship becomes. For couples who have been together for 10 years or more, it is in most cases practically irrelevant.
A usual factor that is considered is who has earned income and the extent to which that income has been applied to looking after the family. However, contributions to looking after the family by raising children and home duties are also relevant. On this basis, there is usually not much adjustment either way – with notable exceptions in short term relationships, where there are no children or if one party had substantial assets by comparison when entering into the relationship. All these factors will need to be weighed in the
Adjustments based on future needs will often have a significant impact on how the pool of assets will be divided.
Some factors that the law considers will be the parties’:
These are known as the “future needs factors”.
These matters must be carefully evaluated. For instance, if one party has an illness, injury or other reason why his or her earning capacity is less likely to be as strong as the other party’s earning potential after the separation, there will probably be an entitlement to a decent adjustment in the favour of the person with less opportunity. That said, there are different perspectives as to how these things can be assessed and careful legal argument can be useful in pressing or opposing such a viewpoint on these matters.
This is an overarching principle which will be weighed by a Court having regard to the particular varying circumstances of the particular facts before it. One party may realistically need more funds upfront, while another party (such as a party with a strong earning capacity) may be appropriately awarded assets that are available later. Current assets in this case may mean proceeds of the sale of a property as opposed to a deferred asset of superannuation.
To discuss your particular circumstances, or if you need help sorting out how to split your property following your separation, please contact us on 1300 907 335 or otherwise please complete the enquiry form on this page and we will respond to you promptly. All enquiries are treated as confidential.
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