Property and financial settlements following separation or divorce
Family & Relationship Law eBulletin - 19 July 2013
If you and your spouse or partner (including same-sex partners) have separated, you will no doubt be wondering how you will divide up your property and other financial assets.
In this article, we talk about your first meeting with your solicitor and what information to bring along to that meeting, as well as looking at going to court versus settling out of court. We also discus the four step process that the court will follow when it determines how your property and financial matters will be settled. These same steps will also apply if you are attempting to reach an agreement out of court.
- First steps
- The first meeting with your solicitor
- What to bring to that first meeting
- Going to court versus settling out of court
- The five step process
- Further information
Property and financial matters can be settled immediately upon separation, so couples who are married do not need to wait until they are divorced.
However, if you and your spouse have already divorced, and have not yet been able to come to an agreement about how your property and financial matters should be settled, you must issue Court proceedings within 12 months of the date of your divorce. For de facto relationships, the time limit in which you must issue Court proceedings is two years from the date of separation.
Regardless of whether your separation/divorce is amicable, it is considered a conflict of interest for the same law firm to act for both you and your former spouse/partner, so you will each need to obtain your own independent legal advice.
You and your former spouse/partner may have already come to an agreement about how you wish to deal with your property and financial assets, and may simply require legal advice about the terms of the agreement and how you may go about formalising it so that it is legally binding and enforceable.
Conversely, there may be factors such as violence or hostility which mean that it is difficult or inappropriate for you to communicate directly with your former spouse/partner about negotiating a property settlement.
Your solicitor can discuss with you the best approach in both of these situations.
When you first meet with a solicitor about settling your property and financial matters, you will be asked a number of questions about yourself, your former spouse/partner and your relationship. You will also be asked questions about the financial circumstances at the beginning of the relationship and during the relationship, as well as your current financial circumstances. It will help if you can provide as much detail as possible.
Your solicitor will ask you about:
- joint and individual assets and liabilities;
- superannuation entitlements;
- your employment and income;
- any business or company interests;
- whether any assets are held by a trust;
- your bank accounts (including credit cards);
- any other relevant financial matters.
Based on the information you provide, your solicitor will be able to give you advice about the likely range of outcomes in your circumstances. They will discuss with you the principles of law that are applied in determining how your assets will be settled (see “the four step process” below) as well as the process involved in reaching a settlement or going to Court.
Your solicitor will also discuss the issues of spousal maintenance and child support with you.
Chronology of relevant dates
Before you meet with your solicitor, it will be helpful to prepare a chronology of relevant dates, including:
- the date you started living together;
- the date you were married (if applicable);
- the date you separated;
- the dates of birth of any children;
- the date of purchase or sale of assets; and
- an employment and income history.
If you do not know exact dates, try and estimate the approximate month or even year.
Values of assets and liabilities
Where possible, you should try to estimate the approximate values of each of your assets (such as properties, cars, businesses, shares and bank accounts). If you have obtained appraisals or valuations of any assets, these should be provided to your solicitor. You should also find out the current balance of any of your liabilities, such as mortgages or credit card debts, and bring the statements with you.
If you and your former spouse/partner disagree about the value of an asset or if the value is not known, it may be necessary to obtain independent or certified valuations.
Copies of relevant certificates, agreements or Orders
If you were married, you will need to bring a copy of the Marriage Certificate and, if relevant, your Divorce Order.
If there are any existing Orders or Agreements in place between you and your former spouse/partner, these will also need to be provided.
Other relevant documentation
It is important to provide your solicitor with as much documentation as possible in relation to your current financial circumstances and your financial history, including bank statements, superannuation statements, trust deeds, individual and business tax returns and business financial statements.
It is compulsory that both parties exchange all relevant financial documents before reaching any final property settlement. This enables both solicitors to gain a full understanding of each party’s financial circumstances and to compile an accurate list of the assets and liabilities.
Your solicitor will discuss with you the best course of action, which will either involve settling out of court or issuing proceedings and going through the court process.
Settling out of court
Once all relevant financial documents and valuations have been obtained and exchanged, negotiations can commence as to how your assets and liabilities are to be divided between you. This can be achieved by such methods as:
- putting an offer in writing;
- a round table conference; or
At a round table conference, both parties and their lawyers meet to try and settle your matter.
Mediation, as the name suggests, involves a mediator who is usually an experienced family lawyer. The mediator will act as a neutral and independent person to try and help the parties come to a resolution.
If an agreement is reached, your solicitor will formalise the agreement in writing so that it is binding and enforceable.
Issuing proceedings and court process
If you and your former spouse/partner are unable to come to an agreement after making attempts to settle out of court, it may be necessary to issue proceedings at the Family Court of Australia (or the Federal Circuit Court).
This involves your solicitor preparing an Application (setting out the outcome that you are seeking) and a Financial Statement (which sets out your current financial circumstances). An Affidavit may also need to be filed, which sets out in written form, your version of events and your evidence in support of your claim. Once the Application has been filed, the court will list your matter for a Case Assessment Conference before a Registrar in the Family Court or a Directions Hearing in the Federal Circuit Court.
The Case Assessment Conference provides an opportunity to settle your matter before it proceeds any further. If the matter cannot be resolved at this stage, you will then be required to attend a Conciliation Conference before a Registrar and this presents a further opportunity to resolve your matter before it is listed for a final hearing.
At the final hearing, your matter will be heard before a Judge (or Federal Magistrate) who, at the conclusion of hearing the evidence and submissions of both the parties, will make a determination of the matter and make the Orders considered appropriate within the guidelines of the Family Law Act.
The Court adopts a five step process in determining how your property and financial matters will be settled. These steps are also applied in attempting to reach an agreement out of court.
The steps are:
1. Consideration of whether a property settlement is necessary
The first important consideration for the Court is to determine whether or not it is actually necessary to proceed with a property settlement.
In the vast majority of cases, the Court will decide that it is just and equitable for there to be a property settlement or a change in the ownership of a property. However, in some cases, the Court will decide that each party should simply keep what they presently own.
This may be because:
- the parties have decided to keep their financial affairs and arrangements totally separate throughout the relationship;
- the relationship was of a very short duration; or
- the parties separated many years ago and have organised their affairs on the basis of an informal agreement since that time.
2. Identify and value the assets and liabilities
This involves compiling a list of all assets and liabilities (including superannuation) that are in the individual and/or joint names of you and your former spouse/partner, and attributing a value to them.
Values can be approximate or may be determined by way of a formal valuation, as they should be as accurate as possible. The result should be a table of assets and liabilities which your solicitors will use to determine the value of the total asset pool to be divided.
It is also standard practice to establish what the asset pool was when you first started living together (which may have occurred prior to marriage) to work out any increase in asset values and to establish what each party brought into the relationship (referred to as initial contributions).
3. Assess contributions
Once an asset pool has been established, your solicitor will ask questions about each party’s contributions to the asset pool.
Contributions can be:
- financial (such as by way of income, mortgage payments or inheritances);
- non-financial (such as labour to undertake renovations); or
- by way of being a homemaker and parent.
Contributions are usually calculated as a notional percentage, such as 50/50 or 60/40.
4. Assess “future needs”
Once contributions have been assessed, your solicitors (or the court) will consider what are referred to as the “future needs” of both parties. These include:
- the age and health of the parties;
- the earning capacity of the parties;
- whether one party will have the care of young children;
- the duration of the marriage or relationship; and
- any other relevant consideration.
The assessment of future needs will impact the notional percentage reached in Step 2, so that the percentage split of the asset pool may increase or decrease in favour of one or other of the parties to take into account any relevant future needs factors.
5. Is the division of assets just and equitable?
Taking each of the previous steps into account, your solicitors, or the court, will then consider whether the final division of assets as proposed by the parties is just and equitable in all of the circumstances. This may involve assessing the practical effect of any proposed division of the asset pool.
All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.