What You Need to Know About Property Settlement

By 22 September 2021 October 12th, 2021 Family Law, Property Law
What You Need to Know About Property Settlement

Breaking up is hard to do.

There is the sadness and regret that comes with a failed relationship, but there is also the work that needs to be done to disentangle two lives so both people can move forward.

Negotiating a property settlement of assets from the relationship, covering everything from property to cars, shares, joint accounts, superannuation and even pets, can be a stressful, trying process.

The first step in a property settlement is for the ex-couple, whether married or de facto, to identify and value all property from the relationship or marriage, including debts.

This process can encompass things each party owned before, during or even after the marriage or relationship.

It can be a gruelling and sometimes confrontational process to work out this asset ‘pool’, particularly after the breakdown of a long-term relationship where a couple’s lives were significantly enmeshed.

The advice and guidance of specialists in family law like Felicio Law Firm is invaluable in helping clarify the process so that property settlement negotiations can run as smoothly as possible.

How assets from the marriage are assessed

Family law property settlements are governed by the Family Law Act 1975 (‘the Act’).

An ex-couple can come to their own agreement about the division of property from the relationship between them, through mediation or other means, that can be made into a court order which both must abide by. Any informal agreement is not otherwise legally binding.

A court – or consent – order – will only be made if the agreement is ‘just and equitable’ to both sides.

When two parties can’t agree on how property from the relationship should be divided, they apply to the court for property orders which will decide how the assets should be split.

All assets arising from the relationship constitute the total property pool, including assets held by both parties, as well as those held in either party’s name.

The property considered party of the pool is that held at the time the couple separates unless one of these assets was also used to create a new asset after separation.

Typical assets assessed during property settlement as a result of separation and divorce include the home the ex-couple lived in, any investment properties either or both owned, cars, furniture, jewellery, share portfolios or other investments, savings accounts, insurance accounts, inheritances, debts and superannuation.

Real estate: Both parties may decide to sell the house they shared during the relationship to pay off the mortgage or pay off other debts from the relationship. The proceeds of any sale become part of the pool to be divided in a property settlement.

This process will require the parties to obtain valuations of the property, either by a financial institution, a licenced valuer or a real estate agent, to work out a median value.

In other relationships, one party may ‘get’ the house (or the mortgage on it) and be ordered by the court to pay to the other party their share of the asset.

Superannuation: In situations where one party to the relationship paid contributions into a superannuation fund, that person may be allowed to retain that benefit but the amount the ex-spouse would have been entitled to in a split of the fund is reflected in the court awarding the partner an increased share of other assets (such as proceeds from the sale of the former couple’s home).

One party’s super fund may also be split so that its value is divided between the ex-partners at an agreed percentage, or a ‘flagging order’ where the non-member spouse can access a share of the fund once eligible.

Trusts: Assets held by one half of the couple within a family trust may be included in the property pool if the court so decides. Its discretion to include is exercised based on the level of control one party has over distributions from the trust. Evidence of whether either party received a loan, salary or expenses from the trust, as well as the trust’s other historical transactions, may be required to work out its significance to the overall property pool.

Inheritances: It’s a common occurrence that one half of the former relationship inherits money or other assets as a beneficiary from an estate. The timing of the inheritance is an important factor as to whether it will be considered property within the divisible pool. An inheritance received during the relationship, for example, and used for a purpose such as renovations of the marital home will likely be regarded as a contribution to the marriage.

An inheritance received during or after separation, however, may not be considered a part of the property pool. It may still be accounted for, however, in working out the future needs of each party because it is a financial resource available to the beneficiary of the inheritance.

Cars, pets, benefits, other assets: We’ve discussed some of the more significant assets in a property settlement above – what about less significant (in terms of value) property, such as vehicles, household items and pets that were co-owned by the ex-couple.

Cars, jewellery, household items and collectibles will all need to be ‘market’ valued for inclusion in the divisible pool of assets.

In general, courts prefer the estranged parties work out between them which one of them will take and care for pets from the relationship. Unless the pet carries a substantial monetary value (such as a pedigree dog), or are income-generating (such as cattle), it will generally not be considered part of a property pol. Where one party has expended significant funds on the care of the animal, however, a property settlement may be adjusted to reflect future costs and maintenance of the pet by that party.

As with a house, car or other assets, the Court may order the animal to be sold if appropriate.

Sources of income such as Centrelink payments may be considered as part of each party’s financial contributions to the relationship, affecting the assessment of that person’s share of the property pool.

The test used for dividing the property pool

Under the Act, the Court determines what is fair and equitable to both parties given all of the circumstances.

The value of the property pool, minus any liabilities, is figured out before the Court employs a four-stage test which considers:

  • The direct financial contributions each party made to the marriage, such as wages and government benefits;
  • any indirect financial contributions by each party, such as gifts and inheritances;
  • the non-financial contributions to the marriage, such as caring for children, homemaking, house renovating, and;
  • future requirements in light of each party’s age, health, financial resources, care of children and ability to earn (including the effect of a property settlement order on each party’s earning capacity).

In a property settlement, each party to the former relationship must fully disclose their financial circumstances to the other party. This may require them to furnish the other side with a bank and super statements, tax returns, income statements and more.

The duty to disclose continues from the moment property settlement negotiations are initiated until the matter is settled.

One party may also seek an injunction against the other where they believe their former partner is selling or disposing of assets that rightfully should be part of the property pool for settlement. The party seeking the injunction needs to show the court that the ‘dissipation’ of assets is imminent or possible.

The need for good legal advice

Once a divorce is finalised the parties have 12 months in which to seek an order from the court regarding property settlement, otherwise, they must seek the court’s permission to bring an out-of-time application.

The stages we’ve discussed above can take time and painstaking attention to detail. For people who are working, raising children and dealing with the emotional fall-out from a relationship break-up, this can be a very testing thing to do.

Entrusting your side of the property settlement to experienced, understanding family law specialists like Felicio Law Firm will reduce the stress and worry on you. We look after all the details.

Property settlement provides closure on an old relationship, allowing you to move on with your life, but it’s important to get it right so call us central coast family lawyers today for an initial consultation.