When trying to divide up assets after a divorce or relationship breakdown, things can get a little murky. For this reason, the Family Court has developed effective methods to deal with the apportioning of assets after a breakup occurs.
We recommend familiarising yourself with best practices before you start the who-get’s-what negotiations. Knowing what the court will and won’t accept can not only help guide you, but it will give you a framework to begin the financial separation process.
There are two ways that a property settlement can be decided. They are:
- Outside of court
- By the courts
Note: Even if your property settlement is decided outside of court, it must still meet certain requirements to make it a legal document.
Here we explain the family court methods to divide assets in a family breakup.
How are property settlements decided outside of Court?
The parties of a divorce or separation can reach an agreement on the distribution of assets via different means.
For example, a Binding Financial Agreement (BFA) may be made by both parties without having to go to Court. However, there are several requirements for a financial agreement to become binding, as listed by The Family Law Act 1975. For instance, each party must have obtained independent legal advice.
Consent orders may also be agreed upon. A consent order is binding, and is issued by the Court based on an agreement that both parties have drawn up and have given their consent to. A consent order could secure finalising your property matter and prevent future claims.
It should be noted that if the parties were married and have applied for divorce, they must commence court proceedings for property settlement, either by consent or not, within 12 months of their divorce being effective. In the case of de facto relationships, property settlement must occur within 2 years of separation.
Parties may also choose to separate but not file for divorce until years later. However, when a Court is deciding on the distribution of assets, they will only value the assets at the time of Court action, not the earlier time of separation, possibly creating significant surprises for the parties.
How are property settlements decided by the Courts?
The Court will undergo a range of steps to decide on the distribution of assets.
Step 1: Identify the pool of assets
After separation occurs, it is mandatory that both parties declare all of their assets and liabilities, whether they are held in joint names, individually or in any form of trust. This includes both assets acquired during the relationship and assets owned prior to the relationship. All assets must be declared, as hiding assets can have serious consequences.
Step 2: Assess contributions made by each party
The Court will examine all direct financial contributions including salary and investments, along with indirect contributions including inheritance or gifts. They will also assess non-financial contributions including child rearing and full-time home support. Generally, the Court will view both financial and non-financial contributions as equal.
Although assets which were owned prior to the relationship will be given a greater weight earlier in the timeline, whilst not a definitive rule, after approximately 10 years these assets will be treated equally with assets which were acquired during the relationship.
Step 3: Account for future needs
Here, the Court may consider things such as the restriction on earning capacity, age and health, along with ongoing child support. Within this, a 50:50 split is not an expected outcome, as there are many individually assessed factors which will be considered.
Step 4: Just and equitable?
In the final stage, the Court will judge whether the outcome is just and equitable to the needs of both involved parties, along with any involved children.
It should be noted that superannuation will also be assessed, however limits apply as it is an asset that must be retained as superannuation until retirement age.
Conclusion: Family court methods to divide assets in a family breakup
In conclusion, all assets held prior to or acquired throughout a relationship will go into the asset pool, whether they are in single or joint names. Financial and non-financial contributions will be treated impartially.
Family courts have a variety of methods to determine how assets should be distributed. They are in place to ensure that both parties receive a fair and equitable distribution of assets, while also considering the needs of the children involved.
It is important for individuals going through a family breakup to seek the advice of a qualified family lawyer who can guide them through the legal process and help them navigate the complexities of asset division.
With the proper guidance and support, it is possible to emerge from a family breakup with a fair and just outcome that allows both parties to move forward with their lives.
