Working out how to divide property and assets when a relationship ends can be a very difficult time. Emotions are high and yet a sober, clear-minded approach is required in order to formalise an agreement between yourself and your ex to ensure each of you achieves the best outcome for your situation.
A property settlement can be made between ex partners with or without the help of the court to formalise the division of assets, liabilities and other financial resources after separation.
There is often some confusion over what is considered ‘property’ in making a settlement. Some of the things generally considered to be included are:
- the family home;
- jointly owned assets;
- savings and investment accounts;
- investment properties;
- superannuation and shares;
- business interests;
- family trusts and other trust interests;
- debts and any other liabilities.
While the above items are usually considered as ‘common’ assets from the relationship, other assets can also be considered as part of a settlement. These may include one partner’s interest in a company; property owned in only one person’s name; funds or interest over which a partner has influence or control; inheritances; and assets owned before the relationship, during the relationship and acquired after separation.
Making a property settlement without going to court
Property settlements can be complex to negotiate and ideally require the guidance and advice of an experienced legal professional, particularly if you and your ex-partner want to avoid going to court by coming to an agreement between yourselves.
Methods outside of the court process such as mediation and conciliation are often helpful in reaching a property settlement between estranged partners, facilitating a fair and equitable outcome for each of you and maintaining a civil basis to your future relationship with your ex.
If both parties can agree on the terms of a property settlement, your legal representative will advise you to have the agreement finalised either by applying to the court for a consent order or by making a financial agreement.
Financial agreements can be made before, during or after a relationship. They resemble a contract and provide the terms for how property is to be divided if and when you decide to go your separate ways.
Before signing any such agreement, each party must receive independent legal and financial advice. If formal requirements have not been met the agreement will be invalid and the court may set it aside.
Consent orders recognise an agreement has been reached and that each of you abide by its terms. The court approves the order to give it legal effect. It’s possible to apply for a consent order without having to attend court.
Court-ordered property settlements
As mentioned at the outset, it’s an emotional time when a couple separates and often the rawness of the split means the parties cannot reach an agreement on the complicated issue of dividing assets and debt.
In this situation they may need to apply to a court to make an order on their behalf to resolve the issue. At this point people often make the mistake of thinking property will be divided equally between the ex-partners, but in fact each case is different and the court will assess the total assets, liabilities and financial resources of the couple, the financial and non-financial contributions made by each person during the relationship, and each person’s future financial needs, before making a decision on the equitable division of property.
A court will also only make an order if it is “fair and reasonable” to alter the parties’ property interests. A number of steps are then taken to work out how to split the property assets between the parties, including:
- Identifying and valuing the property pool to be divided, including assets, liabilities and financial resources.
- Determining the direct and indirect, financial, and non-financial contributions (such as salary, care of children and homemaking) made by or on behalf of each of the parties, on a percentage basis, during the relationship.
- Considering the future needs of each party (including care of children, health, financial resources, ability to earn).
- Considering whether the division will provide a just and equitable result in all the circumstances.
Where one party is worried their ex-partner will sell property before a settlement is reach, they can lodge a caveat to prevent this happening. The caveat is then lifted and the value of the property split once a settlement is reached. Seek professional legal advice promptly if you believe your former partner is attempting to dispose of property you believe you have an entitlement to.
A married couple must make a property settlement within 12 months of their divorce being finalised, while a de facto couple has two years from the date of separation to make such a settlement. The court may grant an extension of time in exceptional circumstances.
Because some assets increase in value over time, it may be advisable for estranged partners to make a property settlement as early as possible after they separate.
At Arbon Legal Group we are experts in family law matters such as property settlements, either by avoiding the need to go to court, or by effectively advocating for you through the court process. Contact us today!