In this blog and podcast by Family Law Senior Associate Hayley Condon, we canvas the most common FAQs around property settlements, separation and divorce as we hear those questions in our office.
Divorce can be one of the most difficult times in a person’s life. Putting aside the grief over the breakdown of their relationship, divorce often involves a person’s first interaction with the court system. It can be intimidating and emotionally turbulent, with a myriad of legal issues to consider. At Attwood Marshall Lawyers, we often meet with family law clients shortly after they have separated with their spouse. This is a trying time, but one we are experienced in helping with. With the questions and answers below we hope to de-mystify divorce and property settlements so that if you are currently going through a separation, you can make informed decisions which lead to the best outcome for you, your family and your future.
What is a divorce?
A divorce is simply the process of dissolving a marriage. It is a separate matter to property settlement. To apply for divorce, spouses need to be separated for 12 months. A question that we are often asked is whether spouses who have been living separately in the same home for 12 months can apply for a divorce. The answer is yes, however as part of the divorce process you will need to put evidence before the Court to satisfy the Court that during the 12-month period you were not living with your spouse as a couple in the home.
What’s the difference between divorce and property settlements?
Property settlement is the division of the assets after a separation whereas a divorce, as mentioned above, is dissolving the marriage. They are 2 separate processes. You do not have to wait until you are divorced before you can apply for a property settlement; you can seek a property settlement straight after separation.
What is a property settlement and what does it achieve?
A property settlement achieves financial separation. It involves spouses dividing up their assets so they can move on with their lives individually. In terms of the process for a property settlement, it really comes down to the parties in each case. If the parties separate and remain amicable they could reach their own agreement or through solicitors negotiate an agreement which is formalised in a legally binding way to protect them. If, however, there is a lot of acrimony between the parties after the breakdown of their marriage, the matter may need to be resolved by way of litigation.
Even if it’s fairly amicable do you still need an agreement in place?
It is important that parties formalise any settlement they reach in a legally binding way under the Family Law Act. If this is not done what can happen is your spouse could pursue you again later on down the track and before the statutory limitation period expires for a further settlement (so another bite of cherry). By formalising the settlement you are protecting yourself against this risk and you will also receive tax advantages such as the benefit of stamp duty exemptions where property is being transferred between spouses as part of the terms of the settlement.
What about if one party wants to keep things as smooth as possible because they are hoping that something can be reignited in the future?
If parties want to resolve property settlement matters without engaging in costly, lengthy and stressful litigation then it requires compromise on both sides. Some parties are prepared to compromise more in order to achieve a settlement for a variety of reasons, one of those being when children are involved to try and maintain a workable co-parenting relationship for the future. Another is sometimes the hope of a reconciliation in the future, which sadly is often misguided.
Are there Do-It-Yourself versions of property settlements?
Parties can prepare their own settlement documentation. Just like a Will, you can download an Application for Consent Orders from the Family Court website and can find Binding Financial Agreement precedents online, however it is not recommended that parties try and formalise property settlement agreements on their own. The reason for this is that family law can be a very complicated area when formalising agreements especially when it comes to the drafting of the settlement provisions when you are dealing with the transfer of property or tax issues. If you get it wrong, you could end up spending more money trying to fix the problems that arise then what you would have spent in the first place having a lawyer prepare the documentation for you correctly. Settlement agreements under the Family Law Act can be formalised by way of an Application for Consent Orders filed with the Family Court or a Binding Financial Agreement which does not involve the Court.
What assets and financials does a property settlement include?
Settlement agreements reached between separating spouses are specific to each case based upon what property makes up their asset pool. The property that forms part of an asset pool includes assets and financial resources jointly owned by the spouses but also any assets or financial resources owned by the spouses individually. If a spouse owns an asset with a third party such as a parent or other family member then the spouse’s interest in that asset would form part of the asset pool.
What about items where both parties might have an emotional attachment to something?
Sentimental items can be very difficult to deal with in separations, especially where one party is aware that it is important to the other spouse and the item does not have a great monetary value. Such items can be used as a tool of negotiation in property settlements. As the value of the item is generally not significant, it is not financially viable for a party to pursue the issue by protracted negotiation or litigation. If you are going through a separation which is acrimonious or looks like it will end up that way you should strongly consider removing sentimental items from the home in particular if you are vacating the home, otherwise they may disappear.
How does superannuation get factored into property settlements?
Superannuation is included as part of the asset pool in a property settlement. There is a common misconception with superannuation that if a party brings an amount of superannuation into the relationship that this amount will be excluded from the pool if the parties separate in the future. This is not correct. The full value of the party’s superannuation will be included in the asset pool, however when a Court considers how the property and in particular how the superannuation is to be divided the value of the pre-relationship superannuation brought in by the relevant party will be taken into account.
How do courts decide who gets what in property settlements?
Judges have a wide discretion when making property settlement orders for separating spouses. The Court must be satisfied firstly that it is just and equitable to make an Order, if not the Court does not have to make an Order. After this the Court applies a 4-step approach when determining what property orders to make which involves:
- Step 1 – Identifying the asset pool and its value;
- Step 2 – Considering the contributions made by the parties over the length of the relationship and post separation (including financial contributions, homemaking and parenting contributions and non-financial contributions) and ascribing a percentage value to those contributions;
- Step 3 – Considering the future needs of the spouses and whether a percentage adjustment should be made in favour one party (i.e. due to one spouse having a greater income earning capacity or a spouse being the primary carer of young children);
- Step 4 – Consider whether the percentage division reached under the preceding 3 steps is just and equitable or whether any further adjustment should be made in favour of a party. A further adjustment at this step is rare.
Once the Court decides how the asset pool will be divided between the parties in terms of a percentage division it then has the power to make Orders detailing what specific assets each party is to retain as part of their property settlement, if such issues are in dispute.
What is the impact of a separation or a divorce on other documents?
After a separation parties should turn their mind to the legal documents that they have in place such as their Will, Powers of Attorney, Appointment of Enduring Guardian or the Binding Death Benefit Nominations in place for superannuation accounts. It is not unusual when parties are married or in a de facto relationship that they put these documents in place while they are together nominating each other in the roles of Executor and Attorney and nominating each other to receive the benefit of superannuation entitlements upon death and their estate under their Will. It is therefore important that after a separation parties turn their mind to changing these documents to remove their spouse. If this does not happen and a party passes away their estranged spouse could end up with their estate under their Will and/or their superannuation death benefits.
This risk also applies to Powers of Attorney/Appointments of Enduring Guardian. If you do not change your documents after a separation your estranged spouse will still have power under those documents to make decisions for you. These outcomes ordinarily do not reflect the wishes of separating spouses but is often a step which is forgotten after a separation as the focus is on the breakdown of the relationship.
How can Attwood Marshall Lawyers help?
At Attwood Marshall Lawyers in the first meeting we discuss the issues that need to be resolved arising from the breakdown of your relationship including property settlement, parenting matters and divorce but also deal with your estate planning issues so that you can take steps to prevent the undesirable outcomes set out above.
Unlike generalist or boutique firms, Attwood Marshall Lawyers offer a dedicated Family Law department who practices exclusively this complex field and can also deal with estate planning or structuring issues. We provide quality legal services, exceptional customer service, and are highly experienced in divorce, property settlements and parenting agreements. Our firm has a unique structure, where you are in direct contact with your lawyer, rather than being directed to secretaries. For an initial appointment to discuss your matter, please phone: 1800 621 071.