Myths About Family Law Property Settlements
According to the Australian Bureau of Statistics, a whopping 46,600 divorces were granted in Australia in 2016. In addition to the serious emotional toll of divorce, there are seemingly endless logistical concerns as well, including asset division, childcare and property settlements. Unfortunately, because of how common divorce is there is a lot of false information around about its consequences. Below, we do our best to debunk some of the more persistent myths surrounding property law settlements.
Property Division and Divorce
Though often a direct result of divorce, there is no requirement that your divorce needs to be final before negotiating your property settlement. In Australia, you need to be separated for at least one year before qualifying for a divorce application. However, property division can begin as soon as you separate and must be finalised within one year of the date of your divorce.
Previously Owned Property
In the event of divorce or the dissolution of a de facto relationship, a four step process is used to determine how assets should be divided, based on how a court might order it to be done. Property that was brought into the relationship without any contribution from the partner, will not necessarily remain the property of the original owner when a relationship ends.
- Asset identification: First, you must take inventory of all the assets and liabilities in the relationship. This may include property owned individually or jointly (both with each other and with third parties).
- Contributions: When dividing assets, the Court will look at the contributions made by each party in the relationship. This includes economic contributions (such as income), non-economic contributions (such as homemaking and childcare), and external contributions (such as inheritance or gifts).
- Assessment of future needs: Courts will also consider whether one party may have greater needs than the other moving forward by factoring in earning capacity, age, health, childcare needs, and more.
- Justice and Equity: Overall, the Court will come to an arrangement that is just and equitable in light of all of the attendant circumstances. In non-legal terms the settlement should suit the needs of both parties and be practical.
In general, the Court is free to use its discretion when determining the divisions of assets, and parties will likely negotiate along these same lines.
Equal Division of Property
A related myth of property settlement is that the division of assets will be a 50-50 split between partners. However, there is no policy which requires an equal split. Just as every relationship is unique, every dissolution will be unique, too. The percentage amount that each partner will receive is based on a variety of factors including (but not necessarily limited to): the length of the relationship, contributions made to the marriage, current and future needs, earning capacity, childcare, and more. Generally, the longer that the relationship has lasted, the more even the marital contributions will be. In longer relationships the Court has strong consideration of the needs of the parties after separation.
Assets that were held by a company or a trust will not necessarily be excluded from a property settlement. When property is held by a company or trust, the Court will look at who is in control of the company or trust. If one of the parties have some control over the company or trust then the Court will be able to consider it either an asset of the marriage, or at least attribute it to one of the parties when determining worth.
Pre-Nuptial Agreements and Binding Financial Agreements
Prenuptial Agreements (“pre-nups”): Though popularly thought of as an American invention beloved of celebrities, prenuptials are in fact less sensational than movies and newspapers would have you believe. In fact, they are a useful way to establish a property distribution plan and protect assets from being included as marital property. Is there an Australian counterpart? Yes…
Binding Financial Agreements (BFAs): Binding financial agreements are legal documents that act as protection for those entering into new relationships. Having a BFA means that, if in the unfortunate event that the marriage breaks down, they have a plan for how they want to divvy up their property. This can reduce the cost and stress of property settlement, and perhaps reduce the negative feelings that go hand-in-hand with negotiating who gets what and how much.