How does property settlement work in divorce?
Going through a divorce is always difficult, and questions surrounding property settlement can make such a time even more stressful. Whilst a property settlement can be achieved through private negotiation between partners, it is important to remember that there are many ways to approach a property settlement after a divorce, including with or without a Court’s assistance.
What is property settlement?
A property settlement is the division of property between two individuals after they have separated. The end result should reflect a fair and equal division of property between the two individuals.
What is meant by ‘property’?
The term ‘property’ includes all of the assets that both individuals have brought into the relationship. This will also include property acquired during and after the relationship.
This may include things such as houses, loans, land, cash, trusts, bank accounts, inheritances and household items. Non-financial contributions such as homemaking and caring for children will also be taken into account. Property will be valued either at the date of settlement or court hearing.
It will not matter whether the property is in your name, your former partner’s name, or both your names. The process of property settlement will allow for these titles to change in order to ensure that all property is divided fairly between you and your former partner.
Methods of property settlement
A property settlement can be done with or without a Court’s assistance. In considering which option to take, it is important to think about the state of the relationship between you and your former partner, and other relevant factors such as time and money. Agreements settled without the Court will save time and money, and can also result in less tension between the two parties.
If you and your partner can agree upon a property settlement, there are several different methods, including:
- An informal agreement. Informal agreements do not involve the Court and are not legally binding. This means that the agreement cannot be enforced if an individual fails to adhere to certain requirements.
- Consent orders. This involves asking the Court to turn your agreement into consent orders through an application. If the Court deems the agreement to be fair then it will turn the agreement into consent orders which are then legally binding. Obtaining legal advice before signing consent orders is highly advised. Lawyers can help to draft the terms of the property settlement agreement and ensure that all requirements are met.
- A binding financial agreement. These agreements are legally binding and would require each party to obtain their own legal advice. A financial agreement can be made before, during, or after a relationship has ended.
As a general rule, it will be beneficial to formalise the terms of an agreement as it will ensure that the agreement is legally enforceable. This will provide a mechanism by which parties must comply with the agreement made, limiting uncertainty and risk.
There is also an option for Court intervention, which will involve the Court making an order on behalf of both parties. If this route is taken, it is important to remember that time limits will apply. In the case of a divorce, an application must be lodged within 12 months of the divorce order becoming final.
It may be in the interests of both parties to come to a mutual agreement as soon as possible. This is especially the case where assets owned increase in value over time.
If your time limit has expired, a special application can be made to the Court requesting permission to apply, though this is given only in exceptional circumstances.
There is no set method for the Court in determining how property should be split. Instead, the Court must take into account considerations such as:
1) What property is owned and the value of it
If you are unsure of what your partner owns, you may consider asking the Court for a subpoena.
2) Contributions to the relationship
Contributions include both financial and non-financial contributions. Financial contributions include any money that may have been provided, deposits and wages. Non-financial contributions include unpaid work, which may include the act of maintaining property or a partner’s business, or as a homemaker.
Contributions made after the divorce and up until the time that a property settlement is agreed upon may also be relevant depending on the circumstances.
3) Future needs of both parties
Factors such as age, health, income, future earning capacity and the responsibility to support children will all be considered here.
The Court will aim to ensure that the concluding settlement is just and equitable in all the circumstances. It is important to note here that there is no presumption that property will be divided equally between the parties.
If you need any assistance regarding issues of property settlement after a divorce, feel free to reach us via the contact form.
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