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How Property Settlements Work in Divorce?

How Property Settlements Work in Divorce?

At Legally Yours our lawyer members understand that divorce brings many challenging processes, one of which is property settlement. Questions like ‘Who will get the house?’ and ‘Who will keep the cars?’ often come up. Property settlement can get nasty. This article aims to explain the intricacies of property settlements in divorce, including the legal processes involved and key considerations for individuals going through this situation.

What factors are considered in dividing property during a divorce?

So how are assets divided in a divorce? When dividing assets, the family court takes various factors into account. These include the financial contributions of both parties, non-financial contributions, future needs, and any adjustments required to achieve a fair outcome. The court also considers the welfare of any children and whether it is just and equitable to alter the division of property.

Who is entitled to what assets in a divorce? Does the wife automatically get to keep the house?

There is no fixed entitlement to an asset in a divorce or separation. Whether or not a party can retain an asset will depend on a number of factors, including the size of the available asset pool, and the percentage entitlement the parties may be entitled to.

There is also no presumption based on gender, with regard to the specific assets to be retained as part of any final settlement.

When advising a client regarding their property settlement entitlements, we will undertake an assessment of the matter, with reference to Section 79(4) of the Family Law Act 1975 Cth (the Act). The Court has broad discretion when making property orders and adopts the following 4-step process:

(a) First we are required to identify and value the joint assets of the relationship. Property is defined in section 4 of the Act and includes matrimonial assets, company assets, trust interests and superannuation for example. To identify property, parties must exchange financial disclosure and/or obtain valuations. We confirm that once full and frank disclosure has been exchanged and any required valuations obtained, we will be able to ascertain the assets, liabilities and superannuation available for division.

(b) Second we undertake an assessment of the parties respective (direct and indirect) contributions to the acquisition, conservation and improvement of the property, both financial and non-financial (including homemaker and parent contributions to the welfare of the family). The Act does not specify which contributions should be given greater weight and the Court has broad discretion to determine each case on its own facts. There is also no starting point of equality between parties when assessing contributions and homemaker/parenting contributions are given substantial weight.

If a party had substantial assets at the commencement of the relationship, then this could impact the percentage division, depending on the length of the relationship and whether those assets were intermingled. If a party received an inheritance or windfall during the relationship, this may also be a relevant factor in assessing the parties’ contributions and any percentage adjustment. The intention of this step is to look retrospectively over the factual aspects of the relationship and evaluate whether one party contributed to the joint assets, more than the other.

(c) Third, we consider the parties respective future needs pursuant to Section 75(2) of the Act. This step requires a consideration of a variety of factors often known as “future needs”, which includes an assessment of each parties’ age, state of health, earning capacity moving forward and who has the care of any children of the relationship under the age of 18 years.

(d) Finally, the Court is required to consider whether the orders proposed are just and equitable. This involves the Court considering the practicality and impact of the orders, including the assets that each party is to receive.

When a lawyer gives initial advice to you regarding your financial settlement they need to consider each step in coming to an overall percentage entitlement.

If you are going through a separation and wish to retain the home, there are a number of steps you need to consider. You should promptly obtain family law advice from an accredited specialist around your entitlements to see whether you are likely to be in a position to retain the home as part of your property settlement. As part of this advice, it may be necessary to engage a mortgage broker to confirm your position to refinance any mortgage and to verify whether you will be able to meet the current/future mortgage repayments encumbering the home.

The decision as to whether to move out of the home, at the time of separation may also play a key role in whether you retain the home in the longer term.

Can I make a claim for division of property after our separation has been finalised?

It is important to note that you can make the following financial claims upon separation:

– The first relates to the division of the available assets, and

– The second relates to maintenance.

Child support is a separate issue and can be dealt with via an assessment through Services Australia/Child Support, or by way of negotiations, and documented in a private agreement.

Maintenance is distinct from child support and relates to funds required to be paid by one party to the other, for their day-to-day financial needs. In order to make a claim for maintenance a party needs to show that they are unable to support themselves from their own resources, and the other party has the capacity to support them from their income.

Typically, in Australia maintenance is ordered on a short-term basis, where one party may require time to recover from ill-health or surgery or may require time to retrain after an absence from the workforce. However, circumstances may arise after separation, where maintenance may be necessary.

One of the most important steps in a financial settlement is documenting the settlement reached, in a legally binding manner. You do not have an enforceable or binding property settlement until such time as it has been documented by way of Consent Orders or a Financial Agreement. Until you have done so, it is possible that your family law property matter is not finalised, and further claims could be made in the future.

If a property settlement is documented by way of Consent Orders, the court may still have discretion to deal with a maintenance claim in the future, if a party was to suffer hardship. This can only be extinguished by entering into a Financial Agreement, which specifically deals with maintenance rights.

If a party has a reason to vary or set aside a final agreement then this can be done through a Court application pursuant to s 79A (or a s 90SM order under s 90SN) in the following circumstances:

a) Where there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance;

b) Where circumstances have arisen since the order was made whereby it is impracticable for the whole or part of the order to be carried out;

c) Where a person has defaulted in carrying out an obligation imposed upon him or her by the order, and in the circumstances that have arisen as a result of the default, it is just and equitable either to vary the order or to set the order aside and make another order in substitution for it;

d) Where, in the circumstances that have arisen since the making of the order, being circumstances of an exceptional nature, relating to the care, welfare and development of a child of the marriage, the child, or where the applicant has caring responsibility for the child (as defined in s 79A(1AA)) the applicant, will suffer hardship if the court does not vary the order or set the order aside and make another order in substitution for the order;

e) A proceeds of crime order has been made covering property of the parties to the marriage or either of them, or a proceeds of crime order has been made against a party to the marriage. Even if the ground is established, the court has a discretion as to whether to set aside the order, vary the order or leave the order intact.

Do we need to divide our assets before we get divorced?

Divorce is the legal end or dissolution of the marriage. Australia has a no-fault divorce system, which means that you do not need to provide reasons for the breakdown of the marriage, only that the marriage has come to an end and there is no reasonable likelihood of reconciliation.

You can apply for a divorce if you have been separated for more than 12 months.

It is possible to still be living together under the one roof, and still separated. However you may need to provide additional evidence to the court regarding your separation in these circumstances.

The granting of a divorce is administrative in nature and does not impact your ability to finalise parenting arrangements or a property settlement prior to the divorce being finalised. However, once a divorce has been granted you have 12 months within which to finalise your property settlement or apply to the Court for property orders.

For many couples, the main priority following separation is finalising a property settlement and parenting arrangements, leaving the divorce to a later time, after the period of 12 months separation has elapsed.

Legal process for property settlement after separation

Following separation, individuals may pursue property settlement through legal channels, considering financial agreements, mediation, and the role of legal aid in the process.

If parties are unable to reach an agreement, they may opt to go to court for property settlement. The court will assess the evidence presented and determine on how the property will be divided between the parties.

How long after a divorce do we have before we have to settle our financial matters?

Once a divorce has been granted you have 12 months within which to finalise your property settlement or apply to the Court for property orders, unless agreed with the other party.

Frequently Asked Questions

Q: What is a property settlement in the context of a divorce?

A: A property settlement is the legal process of dividing assets and liabilities between parties when they separate or divorce.

Q: What is a financial agreement in property settlement?

A: A financial agreement, also known as a binding financial agreement, is a legally binding document that sets out the financial arrangements between parties, including property and financial resources, in the event of a breakdown of a marriage or de facto relationship.

Q: How does the property settlement process work in family law?

A: The property settlement process involves identifying and valuing the assets and liabilities of the parties, considering their contributions and future needs, and reaching an agreement or obtaining a court order to distribute the property fairly.

Q: What properties are included in a settlement?

A: The property may include real estate, bank accounts, investments, vehicles, superannuation, business interests, and any other assets or debts accumulated during the relationship.

Q: What happens if the parties reach an agreement on property division?

A: If the parties reach an agreement on how to divide their property, they can formalize the agreement through a legally binding document, such as a property settlement agreement or consent orders approved by the family court.

Q: What if the parties cannot agree on property division?

A: If the parties cannot agree on how to divide their property, they may need to apply to the court to resolve the dispute through litigation, where the court decides how the property should be divided.

Q: What is the time limit for making an application for property settlement?

A: In Australia, parties are generally required to resolve property settlement matters within 12 months of their divorce becoming final. However, there are exceptions to this time limit in certain circumstances.

Q: What does negotiating a property settlement involve?

A: Negotiating a property settlement involves the parties and their legal representatives discussing and exchanging proposals to reach an agreement on the division of their assets and liabilities.

Q: What role does the family court play in a property settlement?

A: The family court of Australia or the federal circuit and family court has jurisdiction to make orders for property settlement, including the family home and other assets, if the parties cannot agree or need the court to approve their agreement.

Q: Do I need an expert family lawyer for a property settlement?

A: It is recommended to seek the assistance of an experienced family lawyer to navigate the property settlement process, ensure your rights are protected, and help you achieve a fair and legally binding outcome.

Q: Can I apply to the family court for consent orders as part of a property settlement?

A: Yes, parties can file an application for consent orders with the family court to formalize their agreed property settlement, avoiding the need for a contested court hearing if an agreement is reached.

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This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practising lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Legally Yours Pty Ltd accepts or assumes responsibility, or has any liability, to any person in respect of this article.

This article has been composed utilising content provided by Monica Blizzard from the Legally Yours network.