Property settlement 101: The "four step" process family lawyers use to divide your matrimonial assets
You and your former partner have separated, and the time has come for you to divide the assets and liabilities that you both have.
You are overwhelmed, a little scared, and completely in the dark about how property division works in family law.
Never fear because here we explain how family lawyers determine what you are entitled to under the Family Law Act 1975 (Cth).
Step 1: What is the net asset pool?
First, we make a list of all the assets (property) and liabilities that you and your former partner have solely, together or through a company or trust.
Examples of assets are real estate, shares, bank accounts, jewellery, furniture, trusts, companies, superannuation, and life insurance policies. Liabilities include mortgages, personal loans, credit cards, tax debts, and car loans.
If you or your former partner had property prior to the marriage or relationship, it goes on the list. If either of you received an inheritance after you separated, that also forms part of the list.
Once the list is made, we give each asset and liability a dollar figure. You and your former partner then agree on a value for each item together. If you cannot agree on certain values, you appoint a valuer to determine these figures for you.
When all the values are sorted, we take the figure of what you and your former partner own less your liabilities, and this gives us the net value of your asset pool.
Step 2: What did you and your former partner contribute to the asset pool?
Next, we consider what types of contributions you and your former partner made to the asset pool including:
- Financial contributions. Think salary, inheritance, savings, redundancy payments, gifts, paying part of the deposit on a house, and lottery winnings.
- Non-financial contributions. Did you renovate the house? Were you able to concentrate on your business because your former partner maintained the home?
- Contributions made to the welfare of the family as homemakers or parents. Did you give up your career to stay home and raise your kids?
We then apply a percentage to the contributions of both you and your former spouse/partner.
Step 3: What are your future needs?
The third step is to consider what the “future needs” of you and your former partner are.
Questions that we ask you are:
- What are your ages? Does either of you have health issues?
- How much do you both earn? Is there an income disparity? How much could you and your former partner potentially earn in the future?
- Do you have any kids to care for? Does either of you pay child support?
- What was the length of your relationship?
- Do you have any financial resources? Do you have a wealthy parent that helps you out?
Step 4: What is fair to both sides?
The final step is to look at whether the division is “just and equitable” (in other words, fair and reasonable) to both of you and your former partner. The Family Court of Australia is not likely to make an order about property settlement unless it is fair to both parties.
It is important that you have an experienced lawyer to negotiate on your behalf because any decisions that you make during the property settlement process can determine what kind of life you have in the future.