A 4-Step Guide to Splitting Assets After Separation

After a breakdown of relationship, whether married or de fato, there is always a question of who will get what and how much division of the assets will be. Financial settlement comes into place. Financial settlement is the process of the dividing assets. It is formally ending your financial ties and it is described in percentages.

To workout the entitlement of each party, the Family Law Act 1975 Cth provides the four steps process to determine the division:

1. Identification and valuation of assets

Firstly identify the assets/property, liabilities and financial resources held by the parties as at the time of separation. They may be held in both parties’ names jointly, or just in one parties’ name. They may also be held in a trust or business.

The property includes all possible interests of the parties whenever and however acquired. It includes both properties presently possessed and property expected (for example inheritance.) It may also include assets and liabilities disposed of in the past.

The assets, liabilities and financial resources need to be valued. The value of such property will be considered at the date of settlement, not at separation or when the property was acquired. However, in some instance, the value can be at the agreement of the parties. If the parties cannot agree on the value of property, it is recommended that a qualified valuer should be engaged.

When it comes to liabilities, debts are usually shared unless one party has wasted assets of the marriage like debts incurred in gambling as these debts are not deducted from assets as liabilities normally would be.

In identifying the assets and liabilities, full and frank disclosure must be demonstrated when identifying and declaring assets. Otherwise, the Court has the option of favouring the other party due to dishonesty or lack of credibility on the part of the non-disclosing party.

2. Consider the contributions

All contributions are important and there is no superiority to each other.

Once the assets, liabilities and financial resources are ascertained you need to consider the parties’ overall contributions to the acquisition, conservation and improvement of the assets. This can be through financial contribution made directly or indirectly by or on behalf of the parties like including property brought into the relationship, gifts and inheritance received during the relationship, improvement or maintenance of the property. Also, non-financial contribution should also be considered like contribution to the welfare of the family like being a homemaker or parent

However, it is worth noting that the length of relationship can also be factored in. If there has been long period of relationship, the presumption is parties have contributed equally.

However, the contribution may be adjusted as something other than equal where the relationship is short and there are no children, special skills or has made outstanding effort that have brought substantial wealth into the relationship or a partner behaved in a deliberate or reckless manner resulting in a loss to the parties. In some instances, family violence can also affect affect the property division because of the possibility the family violence may have caused the limit on the ability of a party to contribute.

3. Consider Future Needs

The next step is to consider the future financial needs of each party by taking into consideration factors set out in the Family Court Act.

In considering the future needs, the Court will take into account:

The effect of any proposed order upon the earning capacity of either party;
Age and health of the parties
income, property and financial resources of the parties
parties’ respective earning capacities
physical and mental capacity for gainful employment
arrangements for children under 18
financial commitments of each party necessary to their support
the support of a child or another person
receipt of a pension, superannuation etc.
length of the relationship

Although not specifically included in the law, re-partnering can be considered as a factor as well in the adjustment of the financial settlement.

Once these matters have been considered, the Court will make a percentage adjustment (or sometimes an additional dollar amount) to the “contributions – based” entitlements to the party with the greater future needs. However, it is not mandatory that such adjustment be made.

4. Just and equitable requirement

Unless the property settlement is fair, the arrangements should not be finalized. This requirement is the fourth step in the four-step process of determining a property distribution. What is just and equitable depends on the circumstances of the particular case and all circumstances of the parties, taking into account the first 3 steps, should be considered.

We understand that dealing with financial settlement during such an emotional time can be difficult and confusing. Whilst you may want to end the connection as quick as possible between the parties, it is also recommended to have an informed decision. We at TBA Law can guide you through the process and find a better a approach to prevent costly and stressful process.

A 4-Step Guide to Splitting Assets After Separation

A 4-Step Guide to Splitting Assets After Separation