How are assets divided during property settlement?
Property settlements can be stressful and difficult, particularly because they normally occur after a relationship breakdown. Individuals previously in a de facto relationship or who have recently divorced can apply for a property settlement by either reaching an agreement with or without the court’s assistance. While there are many ways a property settlement can be conducted – including negotiation, round table discussions, mediation – this outline will focus more on the role of the Court in the property settlement process.
What exactly is a property settlement?
A property settlement is the division of property between two people after they have separated. This process can be undertaken for divorced couples and also for those who have ended their de facto relationship. The term ‘property’ in this context refers to all the assets that both individuals have brought into the relationship. This will include property acquired before and after the duration of the relationship. It is important to note that property encompasses both financial assets such as loans, houses, superannuation, and cash, as well as non-financial contributions, such as caring for children.
The end result of a property settlement is meant to reflect a fair and equal division of property between the two separated individuals.
How are assets divided?
Whilst there is no set procedure with which a Court must divide property, the Family Law Act governs how property should be divided in a property settlement and outlines a number of considerations the Court must take into account during the process. These four considerations include:
- Identifying the asset pool
This involves identifying what property is owned and the value of it (aka the asset pool). This means identifying all assets and liabilities such as superannuation entitlements, trusts, and companies, as well as personal assets. This is done regardless of whether the property is registered in individual or joint names. Each party will have to disclose their financial property and you may consider asking the Court for a subpoena if you are unsure of what your partner may own.
If the value of any asset is uncertain or cannot be agreed upon between the two parties, you can consult an expert, such as a real estate agent who can give a market appraisal of the asset.
- Assessing the contributions of each party to the relationship
This second step requires the Court to assess how much each party contributed to the maintenance of any assets. As noted above, this process will include assessing any financial contributions such as deposits and wages, but will also take into account non-financial contributions. This means that working as a homemaker or stay at home parent will also be taken into consideration.
Thus, it may not matter that one partner earned much more than the other or if property was only in one person’s name. The other partner may still have rights to property if it is considered fair in those circumstances.
- Consideration of each individual’s future needs
The third step measures the future needs of each party, taking into account important issues such as differences in earning capacity, the availability of financial resources, the care of children, the health of each party, and age.
- A final examination to ensure a fair result
The Court must determine and ensure that its division of assets is just and equitable in the particular circumstances of the case. This means if there has been any misconduct in the relationship (e.g. domestic violence), this can be taken into account and will usually result in a greater award of assets to the injured party.
Importantly, ‘equally’ in this context does not necessarily refer to a perfect 50/50 split in assets and there is no presumption that assets will be divided between two parties in this way.
In seeking the Court’s assistance in property settlement cases, it is important to note that time limits apply. For example, in the case of a divorce, an application should be lodged before a period of 12 months has passed since a divorce order has been finalised.
If your particular time limit has expired, you can make a special application to the Court.
There are other methods to achieve a property settlement without the Court’s assistance.
Court intervention is often time consuming and costly, and it is often therefore in the interests of both parties to reach a settlement without the court’s assistance. In fact, a majority of cases are settled without the court’s assistance. Alternatives to court can include negotiation and/or mediation between you and your former partner – either directly between the parties, or through each sides’ lawyers.
If you need any assistance regarding issues of property settlement after a relationship breakdown, feel free to reach us via the contact form.
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