Like with many aspects of a marriage or partnership breakdown, when it comes to dividing assets after separation, it can be confusing.
This isn't helped by the many myths and assumptions that surround it. When dividing assets after separation, the first thing you need to do is get the facts.
So many people who separate find themselves overwhelmed with well-meaning advice. This advice comes from close friends, family, and others who have separated or divorced. The critical thing to remember is that all separations are different. What worked for one separated couple might not be the best way forward for you and your family.
My advice is to keep an open mind. It's great to hear other people's experiences because you can educate yourself and learn what not to do. But please don't think that just because Penny from school pick-up used a kick-arse lawyer who screwed the pants off her ex, you must do this too.
Huge mistakes can be made if you take non-expert advice. These mistakes might be costly and cause further conflict with your ex. Trust me, this is the last thing you want during your split.
As a starting point, the below reveals the actuality around some of the most misinformed areas of your financial separation process.
Facts about dividing assets after separation
1. You don’t need a lawyer to financially separate
I can not stress this first point enough. The Hollywood movie phrase: 'I'll see you in court' is to blame for this misconception:
The reality is you do not need lawyers to separate or divorce. And the court is only required in the most complex cases where all other resolution fails.
This is great news because not using lawyers is a less expensive way to separate, and you'll have more money to divide.
Can you and your ex-partner reach an agreement about parenting arrangements and/or your financial settlement? If so, you can formalise your agreement and make it legally binding by applying jointly to the Family Court of Australia ("Family Court") for consent orders. All of which can be done without engaging a lawyer.
The Family Court has to be satisfied that the agreement is just and equitable and/or in the best interests of the child/ren before they can make a consent order. They have specific methods to divide assets in a family breakup.
Similarly, you can apply to the Federal Court for a divorce, either jointly with your ex-partner or on your own, and can do so without a lawyer.
Note: Should you or your ex engage a lawyer, the other party will usually need a lawyer too. The result is two sets of lawyer fees, leaving a nasty dent in your asset pool.
Don't rush to hire lawyers. You may not need them. Think first about whether you can process your separation without them. Not only will it save money, but it might make your separation more amicable too.
Further reading: Do I need a divorce lawyer for separation and divorce?
2. It doesn’t matter whose name assets are in
Forget about the words: Mine and yours.
As far as the law is concerned, everything within your marriage or partnership belongs to both of you.
I get it! This is not the moment for 'What's mine is yours'. Especially as you are ready to split everything and walk away from your partner, however, it helps to start thinking this way.
So, your car belongs to both of you. And his car … you get my drift. It's yours too!
It doesn't matter in whose name assets are owned or debts are owed. Any assets owned or debts due by either party are assets and liabilities of the relationship. To this end, they must be considered and disclosed to the Family Court in a financial settlement.
Don't rush around the house labelling what belongs. It'll be a waste of time. Instead, work out what you both own and what it is worth.
3. All contributions are valued when dividing assets after separation
Not only is this a common misconception but it can often be a bone of contention.
What is a contribution anyway?
Let me explain.
Most people consider a contribution financial only. For this reason, it might interest you to know that all contributions made to the relationship or marriage are valued.
Below I list the Family Court of Australia contributions categories. You will see that some are more easily quantifiable than others, such as financial contributions. Whereas the non-financial contributions are harder to define.
Having this knowledge when dividing assets after separation allows you to work towards a fair split sooner.
In Australian family law, financial contributions pertain to the monetary investments, such as:
- Assets brought into or acquired during a relationship.
These financial inputs play a significant role in property division upon divorce or separation, ensuring a fair allocation of resources.
Non-financial contributions refer to the valuable, non-monetary efforts made in a relationship, such as:
- Emotional support
- Domestic responsibilities
These contributions are considered when determining a fair distribution of assets and responsibilities after a relationship ends.
Contributions as Homemaker or Parent
Australian family law recognises the importance of homemaking and parenting roles. Contributions in these areas involve:
- Creating a nurturing home environment
- Raising and caring for children and ensuring their well-being
These contributions are factored into property settlement and maintenance decisions.
Surprising facts about dividing assets after separation (cont.)
4. Superannuation can be split during a financial settlement
Next to the super implications of a property settlement.
Fun fact: Each party's superannuation balance is an asset that needs to be disclosed and considered in a financial settlement.
Yes, as I mentioned earlier, in terms of a financial settlement, everything is owned by both you and your partner, even your superannuation.
Superannuation balances can be split, and a portion can be transferred to the other party as part of a financial settlement. Nevertheless, superannuation must stay in the superannuation environment. For example, a husband can transfer a portion of his super to his wife as part of their property settlement. However, the wife cannot then withdraw her super balance in cash to use to fund a property purchase.
These superannuation splitting laws apply to married or de facto couples in all States and Territories of Australia, except for de facto couples in Western Australia.
To confirm, you and your ex-partner's superannuation will be part of the asset pool to be split/shared if required. But remember, wherever it ends up, it must stay in a super account.
5. Current value of all assets and liabilities is required
Keep reading, as my fifth and final point about dividing assets after separation is critical. If you are delaying your settlement, think again.
The assets of the relationship are split when the financial settlement is completed. This can be a long time after the actual separation. Therefore, it is essential that the assets of the relationship are protected and preserved until the financial separation process is completed.
The net asset pool must be valued when the financial settlement is lodged with the Family Court.
The assets and liabilities of each party must be listed in the Application for Consent Orders at their current market value, being the market value when the application is lodged with the Family Court.
Note: Often, couples are prepared to declare the value of their assets and liabilities at their separation date, but wish to keep their current financial position private (as of the date when their application is completed and lodged).
However, the Family Court requires current market value to be used, together with full and frank disclosure, so there is no getting around this.
It is, therefore, advisable for couples to finalise their financial settlement as soon as is practicable after separation.
Before making any significant financial decisions, be sure to understand what happens to finances between separation and property settlement.
Final words: Facts about dividing assets after separation
I have been through a separation with children and know how much there is to consider. It is understandable to feel confused and worried about what happens next.
I suggest taking it slow and getting the facts. Next, you can decide on the best way forward for everyone involved.
As I mentioned in my introduction, listen to advice from others, but don't take it as gospel. While it might be correct and valid, it might not be suitable for you.
There are experts who can help you and your ex to work through this difficult time. Mediators, legal aid, and lawyers are available. Many family law firms offer a free consultation in which you can get a basic understanding of a suitable path forward. Other experts will help you with decision-making and financial planning.
I hope this article has provided you with some much-needed clarity and understanding.
For more support see this free ebook: OMG, I'm a single mum. Now what?