Division of Assets & Property Settlement
When considering separating from a partner it is wise to have a complete understanding of the value of all the assets and liabilities owned by both you and your partner.
Prior to booking any appointment to obtain legal advice, try to collate the approximate values of the following items in either your name or the other person’s name:
- Bank Accounts
- Life Insurance
- Credit Cards
- Car Loans
- Personal Loans
- Lines of Credit
- Business Loans
Sometimes you are not able to obtain the values and if this is the case then do not worry as we have the ability to obtain this information. The more precise the values are the more precise your legal advice will be.
It may be more difficult to ascertain the values of property owned by both parties at the commencement of their relationship.
Once you have a better understanding of your assets and liabilities you should make an appointment to speak to a lawyer to obtain an understanding of how the court would likely divide your property, and the options available to you.
It is important that you understand how a lawyer calculates the division of your assets so that you can assist by providing any additional information that may help your case.
The court uses a 4 step process:
- Establishing the property pool;
- Establishing the percentage division of the property pool based on the contributions that each party has made to the relationship, being both financial and non-financial contributions;
- Considering any Future Needs Factors relevant to either party that may further alter the percentage division;
- Considering when all of the above is completed whether the division is just and equitable in all the circumstances.
The Property Pool is established by ascertaining the value of all your assets and deducting all your liabilities. This creates your NET property pool and it is this figure that the court considers when dividing the pool.
There are 2 ways of establishing a property pool. The first method is to include all of the assets and superannuation and deduct the debts owed.
The second method is to add all the superannuation together but keep it separate from the rest of the assets and liabilities. This approach would normally be used when the value of the superannuation is substantial.
The Net Property pool becomes $400,000 and this is what is to be divided between the parties.
|TOTAL NON-SUPERANNUATION POOL||$300,000|
What if the Property is not in your name?
It is irrelevant whether an asset or property has been purchased in both partners’ names or solely in one partner’s name.
Financial Contributions are the monetary contributions made by one party to the relationship. These contributions usually take the form of:
- Any assets brought into the relationship
- Any income earned during the relationship
- Any gifts or inheritances received throughout the relationship
Non-Financial Contributions are such things as:
- Caring for children
- Daily chores and housework
- Renovations performed to the matrimonial property either by one party or on their behalf
- Maintaining the accounts and book-keeping for the other party’s business
- Gardening/yard work.
Non-Financial contributions are those contributions that have not received any monetary gain but have nevertheless assisted the relationship in some manner.
Contributions that are NOT taken into account are such things as:
- Increased value of a property purchased (if no improvements are made to the property);
- Lottery wins during the relationship;
- Increased Share values.
In these cases the Court will find that neither party should receive the benefit of the increase as neither party made a contribution above and beyond that of the other party.
It is important to understand that the longer the relationship, the more likely it is that a Court will consider the contributions to be equal in the relationship.
The shorter the relationship is, the less likely the contributions will be considered equal and emphasis will focus on what each party brought into the relationship.
Every matter is unique and every assessment of contributions to the relationship will vary from case to case. It is important to remember that there are many exceptions to the issues outlined above and your lawyer will be able to better advise you if any of the exceptions apply to your specific circumstances.
Once the contributions by each party have been considered the Court will then attribute a percentage to each party.
Once the Court has attributed a percentage to the parties based upon their contributions to the relationship, they will then consider whether any further adjustments need to be made to the percentages for any issues that will affect each party’s ability to maintain themselves in the foreseeable future.
Usually an adjustment is made in favour of one party for the following factors:
- One party has the primary care of children from the relationship.
- One party is in poor health and will require ongoing medical treatment or their condition is such that they will be unable to generate or sustain any meaningful employment.
- One party earns significantly less than the other and is not likely to regain their financial position pre-separation as quickly as the other party.
- One party has significant financial resources available to them (such as a beneficiary under a trust) which the other party cannot access.
The Court will then make an adjustment to the percentage attributed either or both parties for the division of property.
Once the Court has established the percentages of the net property pool that each party is entitled they will then consider whether both those percentages attributed to each party is in fact just and equitable. More importantly they will consider whether the actual assets being distributed between the parties is just and equitable.
For example, Superannuation cannot in most cases be used by a party until they reach the age of 65. If one party was to receive as their division of property, all superannuation and nothing else, that party would have no financial means to fall back on his or her feet and as such the Court would likely not consider this division to be just and equitable.
The Courts are rarely agreeable to one party receiving 100% of the property pool and will reject or readjust a division of property that seeks to do so regardless of whether the parties agree to the division or not.
The mechanics of dividing up the property pool
Once the 4 step process has been evaluated and the percentages attributed to the division of property it must then be considered how the property will be divided to effect the division of property.
Remember that the percentage attributed to each party is that which each party is entitled to of the net assets.
At this time you need to decide which assets and liabilities you wish to retain and which assets you do not. Once this has been decided and if agreed to by the other party usually a cash adjustment will be made to one party so as to achieve the division of property.
For example, say the property pool is the following:
|TOTAL NET POOL||$420,000|
Let’s say party 1 was entitled to 50% of the property pool. i.e. $210,000
Let’s say party 1 wished to retain the following assets:
NET Total sought to be retained by Party 1 is $360,000
As party 1 is only entitled to $210,000 party 1 would need to give a cash adjustment to party 2 in the amount of $150,000 to retain those assets.
When considering which assets you wish to retain from a property settlement you also need to consider the financial reality of those decisions. For example you may wish to retain the house and mortgage but if you do not have an income you will likely not to be able to afford to or the bank may refuse credit.
In the event that neither party wishes to retain the property then orders can be made for the property to be sold and the proceeds to be divided.
Superannuation can, in most cases be divided between the parties and in turn and superannuation can be rolled over into a different superannuation fund if required. Again there are some funds that cannot be transferred and you should enquire with your lawyer for clarification on this point.
You can apply for property settlement immediately upon separation if you choose, however if you decide to wait you should note that there is a time limit in which you can apply for property settlement.
If you are married you have 1 year from the date your divorce is granted by a Court to commence proceedings. There is no time limit in which you have to commence proceedings for a divorce except that you must be separated for at least 1 year and 1 day before you can apply for a divorce. Therefore if you do not apply for a divorce for 5 years you will have, say, 6 years to have either commenced proceedings or completed property settlement.
If you are in a defacto relationship you have 2 years from the date of separation in which to have finalised your property settlement or to have commenced proceedings in court for property settlement.