Divorce Payouts

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When in the midst of a divorce settlement it can be tempting to move quickly to reach a final agreement and closure. However, taking action with too much haste can cause significant future issues. There are three specific areas which must be carefully investigated, understood and resolved before everyone can move forward with a clear and clean dissolution. These are inheritance funds, the effect of any assets of a new partner on the final financial agreement, and subsequent claims against an ex-spouse or partner for future assets.

It is rare that an inheritance is left to both spouses or partners. Instead, it is most common that the inheritance is received by one spouse or the other, but not directly given to both. In the instance that an inheritance is distributed to both spouses or partners, the monies will belong equally to both parties. However, it is more complicated if the funds are left only to one individual. While it may seem that the person the monies are left too would remain the only one with an ownership interest in the funds, this is not necessarily so. If the funds are received and kept entirely separate from access or benefit of the spouse or partner and family, then singular ownership is retained by the beneficiary. However, if the monies are commingled in any way, the ownership of the funds can then be challenged. Comingling of funds can occur in any of the following ways;

  • Monies received are put into a joint financial account including; savings, checking, mutual investments or shared retirement funds
  • Monies are used for the benefit of the family such as; improvements to a family home or the purchase of a new home.
  • Monies are used for the payment of ongoing living expenses including; mortgage payments, property taxes, utility bills, or paying down general household or family debt
  • Monies are used for recreational or holiday purposes

If an inheritance is used in any of these manners, the Court can, and often will, determine the monies belong to the family and hence are an asset which can be divided amongst the divorcing parties. In addition, the following circumstances can also be factored into the Court’s decision regarding ownership of an inheritance;

  • Whether the inheritance was received early in the marriage or closer to the time of the separation and divorce
  • How the inheritance affects the financial structure of the relationship or marriage.

A second consideration is the assets of a new partner. The new partner’s assets can be calculated into the funds being considered as part of the divorce financial pool. While this may sound odd, it is not as unusual an issue as one might think. In the instance that either partner moves on quickly and begins a new cohabitating relationship, the assets of the new person can be considered as part of the collective assets of the old marriage or relationship. This can happen in a few different ways;

  1. The partner who is in the process of divorcing has not yet finalized their divorce
  2. The persons engaged in the new relationship start to cohabitate before the divorce is finalized
  3. The new partner is contributing to the welfare and care of the divorcing partner

In each of these three situations, the value being contributed by the new partner to the divorcing party can be considered an asset to the situation as a whole. The monies being expended by the new partner are now part of the asset pool and can cause a change in the calculation of the divorce assets including the amount of entitled spousal support.

An even more concerning circumstance is if the new partner comes into monies while cohabitating with a divorcing party, and the financial arrangements are not finalized. In this case, the assets of the new partner can be considered as assets of the divorcing spouse. Hence, the monies of the new partner can be directed to be paid to the ex-spouse of their partner.

The final consideration is when an ex-spouse makes a claim against assets of the person they divorced years ago. While this may not seem ordinary, it can happen. The circumstances that can create this open-ended entitlement to future assets include;

  1. If the ex-spouse can show that the original financial agreement was unfair at the time of its making
  2. If the original agreement was not properly recorded with the Court
  3. Even if the time limit to bring an additional claim has lapsed, a claim can still be brought if the party bringing the action can show severe financial hardship

Each of these three situations requires the assistance and advice of professionals, including solicitors and financial planners. It is highly recommended that during the course of dividing marital assets these professionals are consulted with so as to prevent any future unravelling of a seemingly completed financial agreement.

If you find yourself in need of assistance with this or any other legal issue, please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 770 780.

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