What is the Erosion Principle?
Updated: 19 January 2024 · Read time: 5 minutes
The erosion principle stipulates that with the passage of time, the worth of pre-marital assets diminishes in a family law property settlement.
Put another way, it means that the longer a relationship has existed, the less weighting the contribution made by an individual has where that asset was provided early in the relationship.
Where a relationship has existed for a longer period of time, normally over 5 years, the less the erosion principle will apply: all assets will have merged into a single economic unit of the couple.
Initial Contributions in Family Law
Before we dive into the erosion principle, it's essential to understand how initial contributions are assessed in family law cases, particularly in the context of asset division.
The process of asset division begins by first calculating the total value of the couple’s asset pool.
Then, there is an evaluation of the financial contributions made by each party to the relationship or marriage.
These contributions are not limited to monetary contributions but also encompass non-financial contributions, such as homemaking and child-rearing responsibilities.
Finally, family law takes into account the future needs of each party, taking into consideration their age, health, employment, and financial prospects.
Premarital Assets and the Erosion Principle
In the context of the erosion principle, premarital assets hold a unique position. The erosion principle primarily focuses on the treatment of assets that existed before the relationship commenced.
Premarital assets are assets that one or both parties bring into the relationship or marriage.
These assets may include:
- Savings
- Stocks
- Investments
- Inheritances
- Superannuation
- Property
- Cars
- Any other valuable items owned before the relationship commenced.
The general idea behind the erosion principle is to preserve - where appropriate - these pre-existing assets as much as possible when dividing property upon separation or divorce.
Property Division in Short Marriages
In shorter relationships, the erosion principle may play a much lower role in property division.
This is because, in such cases, the contributions made during the marriage may be limited in comparison to the premarital assets brought into the relationship.
The court recognises that in these circumstances it may be unfair to divide premarital assets in a way that significantly erodes or devalues those assets.
Thus, the court aims to strike a balance between the contributions made during the relationship and the preservation of pre-existing assets.
Contributions Made During the Relationship and "Uplifts"
In family law cases, the court not only assesses the direct financial contributions but also considers the "uplifts" created during the relationship.
Uplifts refer to the increase in the value of assets during the course of the marriage or partnership.
For example, if one party brought a property into the relationship and the value of that property increased substantially during the marriage, the court may consider this increase as a joint contribution.
This is particularly relevant in cases where both parties actively worked on improving or maintaining a property.
The Springboard Principle
The Springboard Principle is another concept that deals with asset division. It operates on the premise that one party should not be unfairly advantaged or disadvantaged due to the property they bring into the relationship.
The Springboard Principle essentially prevents one party from utilising their pre-existing assets as a "springboard" to achieve a significantly better financial outcome upon separation or divorce.
It aims to ensure a fair and equitable division of property, taking into account the contributions and efforts of both parties during the relationship.
For example, we sometimes encounter situations where one spouse enters the marriage with a business that generates significant income during the marriage.
Without the Springboard Principle, that spouse could potentially retain the entire value of the business upon separation, leaving the other spouse at a significant disadvantage.
The Springboard Principle seeks to prevent such disparities by considering the overall contributions and efforts made during the relationship, and thereby prevent the erosion principle being used to create vast inequality between the ex-partners.
FAQs
What is the Erosion Principle in Family Law?
The erosion principle is a concept in family law that focuses on the preservation of premarital assets when dividing property upon separation or divorce. It aims to ensure that assets brought into the relationship are not significantly eroded or devalued during the division process.
How are Initial Contributions in Family Law Looked at?
In family law cases, initial contributions are taken into account, but balanced against the length of the relationship, non-financial contributions, and whether the outcome as a whole can be said to be ‘fair and equitable.’
What are Premarital Assets?
Premarital assets are assets that one or both parties bring into a defacto relationship or marriage, such as savings, an inheritance, investments, property, or any other assets owned at the outset of the relationship.
What is the Springboard Principle?
The Springboard Principle prevents one party from using their pre-existing assets as a "springboard" to achieve a significantly better financial outcome upon separation or divorce. It ensures a fair and equitable division of property, taking into account the contributions and efforts of both parties during the relationship.
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