In Australia, there are no specific systems of ‘separation’ or ‘divorce law’ that exist. The law regarding divorce is outlined and contained in the Family Law Act 1975 (Cth) (the Act). This is a common question when it comes to separation and divorce. In Family Law, there is no specific rule or formula to determine how to divide assets in divorce but, there are a range of factors that are considered.
If you are considering legal counsel, make sure your lawyer understands your particular situation and all factors involved. A trusted and knowledgeable family law expert can advise you on an appropriate property settlement and splitting assets in divorce. Find a property settlement lawyer that is committed to understanding your situation and can guide your decision regarding your divorce.
Often the advice you are provided with from the outset of your matter will impact what important steps and decisions you need to take.
What is a divorce settlement?
A property settlement and divorce are two different legal processes. Divorce is the legal termination of a marriage that will result in the parties being able to remarry. You are able to formalise your property settlement without applying for divorce.
On the other hand, a property settlement involves splitting assets (property) following a separation. The division of assets can be discussed as soon as a couple separates.
Who gets what in a divorce settlement?
When it comes to family law and property settlement, assets that are the property of you and your former partner are considered ‘marital property’. This can include property that is previously owned by one person at the start of the relationship.
‘Property’ and ‘assets’ are not necessarily split 50-50, which is why it is good to involve a property settlement lawyer. In order to understand who gets what, you will need to understand the four-step process of dividing assets in divorce.
How Are Assets Defined?
When it comes to asset split in divorce, this can happen whilst the parties are still living together and can be finalised before the divorce itself is finalised. Assets are valued in the first step of the process for asset split in divorce. If you know the process for divorce and splitting assets, this can help you better negotiate with your former partner.
What’s the Process for Dividing Assets in a Divorce?
Knowing where you stand can help prevent you from going through the lengthy and expensive legal process. The following is the four-step process that the court follows when it determines a property settlement.
Property settlement in Australia is calculated using a process outlined in Section 79 of the Act:
1. Valuing the assets
First, we will define what an asset is to understand family law and its effect on property settlement. Regardless of whether assets were acquired before or during the marriage, they are identified and valued. This includes assets, liabilities, and financial resources.
Assets includes anything of value – property, cars, savings, and jewellery are some of the things that can be valued when assets are split in divorce.
Liabilities are defined as anything that the couple could be financially accountable for. Some examples are debts, mortgages, personal loans, and taxation liabilities.
Financial resources include something that could have future financial benefit: pension entitlements, interest in a discretionary trust, anticipated inheritance and more.
Involving a property settlement lawyer to value the assets will ensure that nothing is missed.
2. Valuing contributions
Contributions refer to the financial or non-financial contributions of the couple coming into the relationship, during the relationship. This is decided on a percentage basis. In a marriage with no children, pre-cohabitation is considered. Some examples of financial contributions include wages, government payments, gifts, or inheritance, including assets such as cars or real estate.
Housework, looking after children and renovating the house are considered non-financial contributions. This includes anything that assists in maintaining the house, the family, and the relationship.
3. The future needs of the parties
Calculating the “future needs” of the parties is the third step of dividing assets in divorce. The court will decide the respective shares in property settlement based on each parties’ contributions. Then, an ‘adjustment’ is made considering each party’s future needs.
In considering ‘future needs’, the court looks at a range of factors including future earning capacity, health, age of the parities, employment prospects and financial resources. The adjustment also considers the responsibility of children post-separation and divorce, the length of the marriage and the extent to which it has affected the future earning capacity of the parties.
During this third stage, percentage adjustments are made to reflect the care and support of young children and how it can impact a parent’s income or capacity to earn income.
4. The Practical Effect
The final step when it comes to asset split in divorce is the decision. The court will look at whether the decision is equitable and fair.
Women with dependent children are seen at a disadvantage to men in terms of their financial contributions and their income earning potential following a divorce. Single mothers and older women living alone post-divorce can experience a change in living standards. The court may offer a higher adjustment in favour of them as they have less earning capacity. Nevertheless, the outcome of divorce and splitting assets will depend on the specific circumstances of each case.
How long does a financial settlement take?
If the parties are agreeable when it comes to property settlement, financial settlement can be finalised in as little as two weeks. If there are disagreements, mediation between property settlement lawyers can take a few months. A financial settlement can take up to 3 years to finalise if the settlement is left to the court to ultimately determine.
At Le Brun & Associates, our dedicated team of Family Law and property settlement lawyers can help you with a tailored approach based on your individual circumstances. With extensive professional experience, our team is ready to help and support you. We’ll work with you to get a fair and equitable outcome and discuss all your options so that you are fully informed of all important steps you need to take through this process. We offer urgent and prompt advice to ensure you make the correct decision. Contact us today for your FREE 30-minute consultation. At Le Brun and Associates, you can rely on us as we always stand by you.