After the breakdown of a relationship, whether or not the parties are married or unmarried (de facto) there are “loose ends” to tidy up. One of those loose ends is a property/financial settlement – a division of the assets, liabilities and financial resources, including superannuation.
In working out ‘who gets what’, family lawyers follow what is essentially a five-step process.
- Does there need to be any adjustment at all between the parties?
There is no automatic right to an adjustment of property/financial interests. In some cases, if there are no joint assets, it may be that no adjustment is required. However, most cases will need an adjustment of some sort
2. Identify legal and equitable interests that the parties hold – ie ascertain the parties’ asset and liability pool, including superannuation.
List the assets, liabilities and superannuation each of the parties hold, either jointly or solely. Everything both parties hold is included in the asset pool – the question of who contributed to what is the next step.
3. Looking backwards, assess each party’s contributions to the acquisition, conservation and improvement of the asset pool.
- financial contributions eg income
- non-financial contributions eg home improvements
- contributions as homemaker/parent
- direct and indirect contributions
- contributions made on behalf of a party eg. inheritances/gifts
4. Looking forwards, consider the following for each party:
- age and state of health
- the income, property and financial resources and the physical and mental capacity for appropriate gainful employment
- the care of children under 18
- responsibility to support another person, eg an adult child who is disabled or dependent
- the duration of the marriage/relationship and the extent to which it has affected the earning capacity of a party whose maintenance is under consideration
- Child support
5. Justice and Equity
Finally, take a step back and assess what is ‘just and equitable’ in all the circumstances. This is a very discretionary exercise and the same fact scenario could result in different outcomes before different judiciary and different opinions of opposing legal teams.
When working out who gets what, every case is different – there is certainly no ‘one rule fits all’. For example:
- Some couples get stuck on Step 2 because they cannot agree on the valuation of a business or piece of real estate. In those cases, independent expert valuations often need to be obtained.
- Some couples get stuck on Step 3 because they cannot agree on what adjustment should be given to a party who had a stronger financial position at the time when the parties started living together.
- Some couples get stuck on Step 3 because they cannot agree on what adjustment should be given to a party who received inheritances through the marriage/relationship.
- Some couples get stuck on Step 4 because they cannot agree on what adjustment should be given to a stay-at-home parent who primarily looks after the couple’s young children while the other parent earns a significant income.
When requesting advice on a possible outcome for your financial settlement, expect to be given a range of percentage entitlement. For example, anywhere between 55% – 70% of the asset pool. As outlined above, this is a very discretionary exercise.
For more information about how property/financial settlements work, come along to our next free information session on Tuesday, 20th April 2021, where I will be providing more detailed information.