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When you separate from your partner or spouse, your assets (and sometimes even your liabilities) need to be divided in a formal and final way in what is known as a ‘property settlement’. It is always a good idea to get professional legal advice about family law property matters. It is important that you get the right advice as to what you may be entitled to in a financial settlement and you may need assistance to negotiate a resolution with your former partner or spouse. Even if you and your former partner or spouse have gone your separate ways and have managed to reach an agreement about dividing your assets and liabilities between yourselves, you need to ensure that you protect yourself from a claim by your former partner or spouse later down the track. Aston Legal Group can provide advice to you regarding all family law property matters and negotiate on your behalf.
What is included in a property settlement?
Prior to commencing Court proceedings seeking a property settlement (by filing an Initiating Application for Financial Orders), parties should make a genuine effort to resolve their matter outside of the court system wherever it is appropriate to do so. If parties are unable to resolve their matter without resort to litigation, an application can be filed at any time after separation. Property settlements can be finalised prior to divorce but court proceedings for a property settlement should be commenced within 12 months of a divorce. There is a common misconception with property settlements that the parties assets will be divided equally between the parties however, this is not always correct. The Family Law Act sets out the factors which the Court takes into consideration when determining a property settlement.
The Process of a Property Settlement
Identify assets, liabilities and financial resources: The first step taken by the Court in determining a property settlement is identifying all items in the parties’ joint asset pool (which may be either jointly owned by the parties or solely owned by one of the parties). The items in a joint asset pool include not only real estate, bank accounts, motor vehicles and shareholdings but also all liabilities including mortgages, credit cards and personal loans. Each asset identified as forming part of the asset pool will need to have a value attributed to it. In circumstances where there is disagreement between parties of the value of assets or where it is difficult to attribute value to an asset, a professional valuer will often need to be engaged to perform an expert valuation.
Identify contributions made by the parties: After determining the asset pool, the Court will take into consideration the contributions that each party has made to the asset pool. The Court may then make adjustments in either party’s favour depending on such contributions. These contributions can include both financial and non-financial contributions and both direct and indirect contributions. Financial contributions can include personal income, redundancy payments and improvements to the value of assets as well as gains or windfalls, such as inheritances. Assets owned by a party prior to commencement of the relationship, known as ‘initial contributions’, are also included as financial contributions. Non-financial contributions typically include a party’s role as homemaker or having primary care of the parties’ children.
Identify the Future Needs of the Parties: The Court must also assess what, if any, the future needs of each of the parties are. This requires the Court to take into account a number of factors including age, health, income earning capacity, financial resources of each of the parties and the parenting arrangements and responsibilities of each of the parties. The Court then determines whether any percentage adjustment should be made in recognition of these factors.
Just and equitable: The final step in the Court’s process of determining a property settlement is to ensure that any orders it makes are just and equitable.
important things you should know
Information about property matters
In the Family Court of Australia, parties intending to apply for financial orders must first attend dispute resolution before filing an application. The application can then be filed any time after separation but should be filed within 12 months of a divorce. In the Federal Circuit Court of Australia, parties are encouraged to seek to resolve issues they disagree upon before filing an application but are not strictly required to do so. The Federal Circuit Court will often make orders requiring that parties attend dispute resolution before their matter progresses through the Court system.
Despite a common public misconception, there is no legal presumption that property should be divided equally between parties in family law property settlements. The Family Law Act 1975 sets out the factors which must be taken into account when a Judge is deciding on how property is to be divided. The Court will always consider whether it is ‘just and equitable’ to make an order for an
In dividing the assets of the marriage, the Court will:
- Identify all assets and liabilities which form part of the joint asset pool;
- Consider the respective contributions made by both parties including:
- Direct financial contributions made by each party (eg. income);
- Indirect financial contributions made by each party (eg. inheritances or gifts);
- Non-financial contributions made by each party (eg. the role homemaker and/or parent);
- Consider the future needs of each party, including but not limited to:
- Age and health;
- Income earning capacity and financial resources;
- Physical and mental capacity to maintain gainful employment; and
- Care of children;
Consider whether it is ‘just and equitable’ to make an order for an adjustment of property.
The Family Law Act considers superannuation to be an asset which can be divided between parties going through a family law property settlement. It is commonplace for the parties’ superannuation to be equalised so that each party walks away from the settlement with an equal amount of superannuation. When this occurs, an amount of superannuation is rolled over from one party’s superannuation account into the other party’s superannuation account; superannuation is not converted into a cash asset. Although equalisation of superannuation is common, the court may decide against this in certain circumstances, including where one party had accumulated a large portion of their superannuation prior to the commencement of the parties’ relationship.
Parties can finalise a property settlement before getting a divorce, as long as they are separated. This can be done either by private negotiation between parties (with or without the assistance of legal practitioners) or through the Family Court system.
Parties can finalise their family law property settlement as soon as they want after separation. A minimum period does not apply. However, due to the emotional aspect of the matter, parties may choose to allow a short period of time to lapse before properly considering property division. If seeking to file court proceedings to obtain a final property settlement, a maximum time limit does apply. If you and your former partner were married and have finalised your divorce, an application to the Court for a final property settlement must be filed within 12 months. De facto couples have two years from the date of separation to initiate court proceedings for a property settlement. There are some extenuating circumstances where parties may be granted permission to initiate property settlement proceedings outside of the usual time limit. We always recommend that parties seek legal advice about a property settlement as soon as they separate in order to best protect their assets pending a final property settlement.
“Liberty is the right to do what the law permits.”
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