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Property Settlement


Contact Armstrong Legal:
Sydney: (02) 9261 4555
Melbourne: (03) 9620 2777
Brisbane: (07) 3229 4448
Canberra: (02) 6288 1100

Peter Magee

A 'property settlement' is the general term used for the financial settlement that occurs after a couple have separated. In layman's terms, it means 'who gets what and why'. In legal speak, any settlement reached must be ‘just and equitable’.

In determining the parties’ assets to be distributed, the term 'property' does not just mean real estate. It includes all assets such as shares, investments and bank accounts. It also includes the value of any business and also the value of interests in any companies and trusts. The parties’ superannuation is also included.

In determining a percentage division, a Court will look backwards to assess each party’s contributions to the asset pool and also look forwards to assess each party’s respective needs moving forward. Each of these assessments is an exercise in its own right.

Once a percentage division is reached, how each of the party's is to receive that percentage entitlement is considered. For example, if one party wishes to retain the family home, numbers are crunched to determine what payment that party should receive, taking into account what other assets and superannuation each party is retaining.

A financial settlement can be reached by agreement between the parties or ordered by a Court, if no agreement can be reached. If the agreement is reached by consent, it is very important to ensure that the agreement is formalised, either by way of Consent Orders through the Family Court or by way of a Financial Agreement.

Our Melbourne property settlement lawyers are able to assist you in assessing what is an appropriate settlement for you and the most appropriate method of achieving that outcome.



Below are some of the common questions we receive about property settlements:

How Long After Divorce or Separation Should You Commence Property Settlement?

When parties separate, they can initiate negotiations to resolve their property issues immediately. There is no requirement to wait for a period of time or for a Divorce Order to be made before discussions and negotiations can commence.

Whilst negotiations can commence at any time, an application to the court to make property division orders can only be filed within the following time limits:

  • For married couples, an application must be filed within 12 months from the date a Divorce Order takes effect; and
  • For de-facto couples, an application must be filed within 2 years after separation.

If an application is not filed within these time limits, a party may be barred from seeking property division order from the Family Law Courts, unless the court grants permission to file an application outside of time.

The Family Law Courts may grant permission to commence proceedings outside of the time limits in limited circumstances. When considering whether to grant permission to institute proceedings outside of time, the courts take the following factors into account:

  • Whether hardship would be caused to any party or a child of the parties if leave is not granted;
  • If the application involves spousal maintenance, the party’s circumstances at the end of the time limit.

Generally, losing a right to claim property settlement will not be sufficient to overcome the hurdle of hardship. It is necessary to show serious hardship to a party or a child of the couple for a permission of such nature to be granted.

Property division in family law is complex and there may be some pit-falls like time limits, therefore, it is essential to consult an experienced family lawyer when parties separate.

Dealing With Property Straight After Separation

The period immediately after separation is a very stressful time. One of the biggest causes of stress can be not knowing how to deal with finances in the short term.

Sometimes, people stay living in the same house even though they are separated. In other families, one partner may move out and live elsewhere, which means they have to find a way to pay rent, and cover new expenses.

There are no set rules or laws that set out who covers regular payments after a separation, before a final property settlement has been organised. There are usually many things to consider, including rent or mortgage payments, insurances, school fees, credit cards, personal loans and day to day bills. It is not the case that the Court would expect each partner to pay half of all expenses, as in most families it is not common that each partner earns an equal amount or is able to contribute equally.

If a family already has an existing arrangement that they can afford to continue, it is usually best to keep things as they are for a short period of time. That way, everybody knows the usual arrangement, bills continue to be paid and it can minimise the changes that are going on in the life of the family.

Problems can arise where the family can no longer afford to continue the existing arrangement, because of the increased costs of living separately. Where possible, the couple should have a discussion about who will pay which bills or regular payments, and whether there are any regular payments that can be reduced, put on hold or cancelled. You should always seek financial advice, but some of the options that can be considered are:

  • Cancelling or reducing regular donations to charity, even if for a short period;
  • Having discussions with banks or lenders about putting mortgage or other loan repayments on hold for a short period, or other options that may be available;
  • Cancelling, reducing or putting on hold subscription services, such as Netflix, gym memberships, magazine subscriptions and similar;
  • Negotiating with flexible service providers to alter payment arrangements.

It is important that both parties carefully monitor bank accounts and incoming bills so that both can be satisfied that all obligations are being met. Most service providers can send statements and accounts to two different address, if they are notified that joint account holders have separated.

Every family’s situation is different, and if you are concerned about your situation, you can contact Armstrong Legal on 1300 168 676 for a no-obligation appointment to discuss how we can assist you.

Is Everything Split 50/50?

There is no automatic assumption that everything is split 50/50 when parties separate.

How each party’s entitlement is assessed is a complicated process and requires careful consideration by an experienced family lawyer using the legislative framework as their guide. Each party's contributions to the marriage/relationship are assessed as well as looking at the parties’ future needs.

However, the following scenarios are a few basic examples of when a 50/50 split MAY NOT be appropriate:-

  • One party brought the majority of the assets into the marriage/relationship and there are no children.
  • The parties accumulated their asset pool jointly during their time living together, had children and the children will live primarily with one parent post-separation.
  • There is a large discrepancy between each party’s income earning capacity.

The following scenarios are a few basic examples of when a 50/50 split MAY be appropriate:-

  • A very long period of living together and each party is retired.
  • A short period of living together where all assets were acquired jointly during that time, each party earns a similar income and there are no children.
  • One party brought more assets into the marriage/relationship but the other party will have the primary care of the parties’ children post-separation.

The above lists are not exhaustive and are included simply to illustrate some of the more common scenarios dealt with by our Melbourne family law team. Each person’s situation is different and requires an assessment of its own.

The Process for Determining Property Division

The law provides a process to determine how assets, liabilities, superannuation and financial resources are to be dealt with when a marriage or a de-facto relationship ends.

First, the assets and liabilities of the parties, including their superannuation interests, need to be identified and valued. All assets are included, whether they were acquired prior to the relationship, during the relationship or post-separation and notwithstanding sole or joint ownership. The values of assets are taken into account at the time of property division, not at the time of separation.

Secondly, an assessment is made as to how the parties have contributed to the asset pool. This assessment includes:

Any property acquired prior to the commencement of a marriage or a de facto relationship becomes that party’s direct financial contribution towards the relationship and is called an 'initial contribution'.

Next, consideration is given to whether any adjustment needs to be made, taking into account the future needs of the parties. In this step, the courts look at the age, health, income earning capacity of each party to the relationship or marriage and the care arrangements of any children of the relationship under the age of 18. Generally, the party who has a higher future need receives an adjustment in their favour. For example, if a party has the primary care of young children of the relationship then that party is likely to get an adjustment in their favour.

Finally, a determination is made as to whether the proposed division of assets, liabilities, superannuation and financial resources is just and equitable. In effect, the Courts take a 'step back' and look at the settlement as a whole to ensure that the outcome is fair to both parties.

Both parties should consult independent lawyers to seek advice about their rights to property division. If you require such legal advice, contact one of our expert family law solicitors.

What Do I Get When I Separate From My Partner?

Parties to a de facto relationship may ask the following questions after they separate:

  • Who will keep the house or does it need to be sold?
  • How will money in the bank accounts be divided?
  • Willl a party need to pay out the other?
  • What do the parties do if they own a business together?
  • Does it matter if the parties own properties in Victoria, another Australian State or overseas?

The answers to the above questions are dealt with in what is generally called a "property settlement". What a party receives in a property settlement is not worked out by an exact formula and depends on the circumstances of the relationship. The overriding factor that needs to be considered is if the division of the parties' property is “just and equitable”.

A number of steps are followed to work out how the property of the parties are divided. The steps are as follows:

1. Can the parties ask the court to make an order for property settlement?

There are strict requirements that must be satisfied before a party to a de facto relationship can ask the Court to make an order for property settlement after separation.

2. What property is to be divided?

This step involves working out the assets, debts and superannuation of the parties. This includes:

  • The home;
  • Investment properties;
  • Cars;
  • Investments like share portfolios;
  • Funds in bank accounts;
  • Businesses operated by one or both of the parties;
  • Superannuation entitlements of the parties;
  • Mortgages; and
  • Personal loans

Working out what the parties have to divide can be complicated as there may be a company or trust structures or interests in businesses with other people.

It is very important to properly work out what assets are to be divided taking into account the value of each asset.

3. How did the parties acquire their assets?

After it is worked out what the parties have to divide, the next step is to work out how the assets were acquired. This includes assessing:

  • What each party owned when they first started living together?
  • How did the parties buy property when they were together?
  • How the parties paid for expenses of the relationship?
  • Who was responsible for caring for the home and the family?
  • Did either party receive any gifts or inheritances?
  • How long were the parties together?

Each parties' contribution is then usually expressed as a percentage. It is important to note that there is NOT an automatic assessment that property be divided equally (50% each) just because the parties were in de facto relationship.

4. Are there any other factors to take into account?

The next step is to see if there are any other factors that should be taken into account. These factors include:

  • Who has the care of any children of the relationship under the age of 18;
  • The income of each party;
  • The age and health of each party.

These factors may change the percentage on how the assets are to be divided.

For example:

If one parties yearly income is $160,000 and the other party's yearly income is $ 35,000 then this difference in incomes will most likely result in an adjustment of 10% in favour of the party that has the lesser income. Therefore, if the assessment of how the property has been acquired is 55%/45% in favour of the higher income earning party then the adjustment for other factors will change the percentage division to 55%/45% in favour of the lower income earning party.

5. Is the proposed division just and equitable?

The final step is to stand back and look at the proposed division of property to see if it is just and equitable.

Property settlements arising from de facto parties separating are very complex particularly when there may be issues of if the parties were actually in a de facto relationship. This is why it is important for any person who has separated from their de facto partner to obtain advice from a qualified family lawyer who has experience with de facto relationship property settlements.

Who should move out?

Often when people separate they quickly make the decision to no longer live together. While it is possible to separate under the one roof, more often than not, someone will decide to move out. There are positive and negative effects that flow from deciding to leave the home and the decision of whether to move out is affected by a number of different considerations, some obvious and others not so. While it might be tempting to flee the home once a decision to separate has been made, it is important to consider a variety of legal and practical issues.

Children:

Where there are children from the relationship, the most appropriate course of action is to ensure there is minimal disruption to their daily lives following separation. In those circumstances, it is logical to assume the primary carer of the children will remain living in the home with them to ensure their regular routines are maintained. Where the primary carer does not earn an income sufficient to meet the costs associated with the home, it is appropriate for the primary income earner to continue to meet these costs until other arrangements can be made.

Ownership:

It is important to consider which party is the registered owner of the home, or whether the home is registered in joint names, or by a third party such as parents, or a company. Where the home is registered in one party’s name, consider the risk of that person selling the property without notice and retaining the sale proceeds. In the event this occurs, it is possible to bring an Application to the Court for an order restraining the other party from dealing with the funds. However, it is preferable to ensure the sale does not occur in the first instance, particularly where there is no agreement as to how the proceeds of sale are to be dealt with. In the event the property is owned by a third party, and there is evidence that an interest in that property might be established, strategically, it might be appropriate to remain in the home, if possible, until a caveat can be lodged.

Repayments:

If there are no children of the relationship, or if the care of the children is more or less shared, the next relevant consideration is whether either party is capable of meeting the repayments and bills for the home. Where neither party is able to meet the repayments, the most appropriate course of action is to list the property for sale quickly and come to an agreement in relation to the division of sale proceeds, or that the proceeds be held on trust in a lawyer’s trust account until agreement as to property settlement is reached.

Ability to Sell:

Where the home is registered in joint names, both parties will need to agree in order for it to be sold. Where the other party is known to "drag their feet" or it is likely they will not readily accept the separation, care should be taken as generally speaking, the person who moves out loses control over the sale process. Open homes, cleaning for inspection and choosing a real estate agent can very quickly turn into lengthy and expensive issues and ultimately, the person living in the home will have control over the process.

Family Violence:

In cases where one party has suffered family violence, and they are fearful of their former partner, it is possible to apply for an Intervention Order. After an Application has been made, the Magistrates’ Court will often provide a Temporary Protection Order to the Applicant until both parties can appear before the Court to determine the issues concerning the family violence. One possible outcome of obtaining the Order is excluding the other party from attending the home. Further, if family violence is present and a party is concerned for their safety, it is inadvisable to remain in the home for strategic purposes and the first priority needs to be the safety of the affected party and, potentially, their children.

Whether to move out can be a difficult and emotional decision. Once a person decides that they wish to separate from their partner, often there appears to be no alternative other than to move out of the home as soon as possible. This is not the case. It is important to seek legal advice and ensure the decision is made knowing the possible outcomes and effects before taking the leap.

Does Cheating During A Relationship Affect The Property Settlement?

Unlike some other countries, the Australian legal system does not place blame or seek to understand why a relationship has failed. The Court will not consider whether there was any extra-marital relationship(s) that caused the relationship to break down nor any other reason as to why the relationship has failed. This holds true in respect to Property matters as well as Divorce Proceedings; with both proceedings determined separately.

In respect to Divorce Proceedings, the Court is only interested in whether the relationship has broken down beyond repair. This can be proven even if one spouse does not believe it to be the case. All that is required to prove that the marriage has broken down beyond repair is a declaration made by one spouse that the parties have been living apart for a period of at least 12 months.

In respect to Property Proceedings, again, the Court will not seek to attribute blame. Here, the Court is concerned with the following factors:-

  • Whether it would be fair to make a property adjustment in respect of the couple;
  • What the net worth of the couple consists of (i.e. Assets, Liabilities and Superannuation);
  • What contributions the spouses each made both during the relationship and following separation; and
  • Whether either spouse has any need moving forward. In this respect the Court can consider factors such as the future care arrangements for the children, each parties’ respective age and health and the parties’ respective income and/or employment prospects.

Infidelity is not a factor to be taken into account when determining Property Proceedings. However, in some circumstances, the Court may adjust the property settlement upon consideration of one spouse’s behaviour during the relationship. For example, in some cases, the Court may find that a result of prolonged family violence, one party’s contributions (for example home duties, employment or rearing of the children) to the relationship were made more difficult. The Court may also make an adjustment to one spouse if it is established that the other spouse has recklessly wasted assets of the relationship through actions such as gambling. These adjustments are discretionary and can add complexity to Property Proceedings. For this reason, it is recommended that parties’ seek independent legal advice.

Practical Tips Following a Property Settlement

Create or Amend a Will

Wills made during a marriage or de facto relationship often provide that upon the death of the testator, their estate is left to their spouse or partner. Once a property settlement is finalised, visit an estate planning lawyer to ensure property is dealt with according to instructions and beneficiaries can be amended, if necessary.

Consider Super

When a property settlement is finalised, there is usually agreement between the parties, or Order of the Court for a super split, to effect a just and equitable division of the parties’ net assets and liabilities. The funds contained in a super fund, and the insurance that can be claimed from a super fund upon death cannot be gifted to anyone by a Will. In order to ensure a particular person benefits from receiving the super funds, the member must make a binding death nomination. This nomination can be split between more than one person. It is important to ensure the beneficiaries nominated in the binding death nomination is consistent with the wishes of the member, particularly in circumstances of finalising a property settlement where one party had control over the finances and super arrangements.

Visit a Financial Planner

This practical tip is not necessarily a legal issue, however, in the event a person receives a large, lump sum payment, which is often the case following a property settlement, it is a good idea to connect with a financial advisor to get the best advice as to how to manage financial affairs moving forward. Often in long relationships, one person historically manages the financial affairs leaving the other somewhat in the dark. A financial advisor can provide sound advice in relation to maintaining mortgage repayments, making superannuation contributions and investing funds to ensure the sum received at property settlement can be used effectively and help establish economic security.

Check in with a counsellor or psychologist

Taking care of one’s mental health is extremely important both during and post-separation. Finalising a property settlement might mean, to put it simply, “there can just be a lot going on at once”. It is always a good idea to check in with a counsellor, or obtain a mental health plan from a GP to discuss life moving forward and perhaps obtain useful coping strategies to deal with a former spouse or partner moving forward, particularly where there are children and ongoing parenting arrangements concerned.



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where to next?

If you have any questions regarding family law, we invite you to telephone Armstrong Legal’s experienced, knowledgeable and approachable Family Lawyers. We look forward to discussing your family law questions with you and can also help you arrange a no obligation initial consultation at our office so that we can meet you in person and discuss your case in greater detail. Our office is conveniently located in Melbourne CBD at Level 13, 575 Bourke Street, Melbourne, VIC.

Why Choose Armstrong Legal?

Contact Armstrong Legal:
Sydney: (02) 9261 4555
Melbourne: (03) 9620 2777
Brisbane: (07) 3229 4448
Canberra: (02) 6288 1100

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