We have all heard of the Keep It Simple strategy and while a worthwhile aim, in reality, things can become a little murkier in the realm of divorce, separation and the dividing up of an asset pool.
Nevertheless, the Family Court has developed effective methods to deal with the apportioning of assets when a breakup occurs.
The when and how of it all
Parties can reach agreement on distribution of assets either by:
- Binding Financial Agreement (BFA)
- Consent Orders
The Family Law Act 1975 lists several requirements for a financial agreement to become binding. One item is that each party must have obtained independent legal advice. Consent Orders mean just that, they are Orders issued by a Court that make binding on all parties, an agreement the parties have drawn up and both consent to.
In the case of a marriage, parties need to apply for Orders within 12 months of divorce being finalised, while in the de facto case, property settlement must be made within 2 years of separation.
It is worth noting that in the marriage scenario, a couple may separate but not file for divorce for quite some time, possibly years later. Where a Court is deciding on the asset distribution, the assets are valued at the time of the Court action, not the earlier time of separation. This may have a significant and unplanned effect on expectations – for better or for worse!
Just and equitable
The first step of the Court process is to identify the pool of assets.
Both parties in a relationship breakup are required to fully declare all assets and liabilities, whether held in joint names, individually, or in any form of trust. This includes not only assets acquired during the relationship, but all assets owned prior to the relationship and therefore brought into it. All must be declared, whether owned jointly, singly, acquired during or before the relationship. There are no exceptions, and hiding assets can have serious consequences.
The next step is to assess contributions made by each party.
This will look at the direct financial contributions of salary or investments, indirect contributions of inheritance or gifts, and non-financial contributions, which can take many forms including child rearing, and full-time home support. The Court generally views both financial and non-financial contributions as equal.
Assets owned prior, and then brought into the relationships are given greater weight earlier on the timeline, however, while not a definitive rule, after around 10 years, such things are treated more or less equally with assets acquired during the relationship.
The third step is to account for future needs.
This may include such things as ongoing child support and the subsequent restriction on earning capacity, age and health. The net effect of this is that a 50:50 split is certainly not a presumed outcome and will depend on many individually assessed factors.
The last stage is a big picture judgement of whether the outcome is just and equitable to the needs of both parties involved, and their children.
Superannuation is also assessed, but because it is an asset that must be retained as superannuation until retirement age, there are limits on how it can be handled.
The key takeaways are:
- Assets held prior to or acquired during a relationship all go into the pool.
- Whether those assets are in single or joint names is irrelevant.
- Financial and non-financial contributions are treated impartially.
Family law and property settlement … get the right advice now. Contact us today on 1800 770 780 or get in touch with us via the ‘enquire now’ button below and someone from our talented Family Law team will get back to you shortly.