The short answer is no. This is a common misconception.
There is no exact calculation to decide how assets will be divided between separated couples (also known as a property settlement). However, the Family Law Courts have over many years developed a 4-step process which is used to determine these cases.
Family Lawyers can therefore advise separated couples as to the likely property settlement outcome based on this process.
Our post today aims to educate you about the 4-step process.
Step 1 – Identify and value the asset pool
(a) What can be included in the asset pool?
The types of items that can be included in the asset pool are:
- Real estate;
- Bank accounts;
- Household furniture and contents;
- Interests in a business, company, trust or partnership;
- Debts including mortgages, loans or credit cards; and
For family law purposes, it is irrelevant in whose name the item is held, or whether it is held jointly, individually or by a corporate entity that a party might control.
In most cases all assets are taken into account, irrespective of whether they were acquired before, during the relationship or after separation.
(b) How is the asset pool valued?
Separated couples are required by law to disclose all information and documents relevant to their case to each other, and which are (or have been) in their possession or which they have the authority or ability to obtain.
This is known as the duty of disclosure and the duty starts from the time that negotiations are commenced until the matter is completed.
In reality, what usually occurs is that financial documents such as bank statements and tax returns are exchanged between the lawyers who are assisting the separated couple.
The majority of items in the asset pool can be valued during this exchange of documents. However, some items such as real estate or interests in a business may require valuation by a registered valuer.
If separated couples cannot agree on a value for any item, then a qualified valuer would be jointly appointed to value that item in dispute.
Step 2 – Identify contributions of each party
The second step is to identify the contributions including:
- financial (i.e. wages, other income or funds from third parties like family members);
- non-financial (i.e. carrying out renovations to real estate or running a business); and
- homemaker (i.e. caring for children and the home),
that each person has made during the relationship.
The Court places great weight on the contributions of each party in a short relationship (up to 5 years).
Contributions in medium length relationships (5 to 10 years) can get more complex, depending on the facts of the matter. For example, if parties accumulate joint assets, intermingle funds and/or have children together.
Once relationships are longer (10 years and onwards), less weight is placed on contributions because the Court says, while both parties may have made different contributions, they were a partnership. This is particularly the case if parties have children together.
Step 3 – Identify future needs of each party
The third step is to identify those future needs factors for each separated party which need to be taken into account, such as their ages, health, ability to earn income and responsibility to care for children.
Another factor is the financial resources of either party. A financial resource can include a beneficial interest in a trust, an expectation of receiving money from a personal injury claim or Court case or property from a deceased estate.
If there is a difference in any of those factors which means that one person is at a disadvantage when compared to the other, then the Court can give that disadvantaged person more of an entitlement to the asset pool as this step of the process.
Step 4 – Identify if the outcome is fair and equitable
Lastly, a Court would decide whether the outcome – after completing steps 1 to 3 – is just and equitable (which in essence means fair) to both parties in the circumstances.
At this step, the Court has a wide discretion to award one party more or less of an entitlement.
Assets will not always be divided 50/50 as this is a common misconception.
We would urge all separated couples to seek advice from an experienced family lawyer about their likely property settlement outcome as it will depend on the circumstances of their relationship.
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The information contained on this site is for general guidance only. No person should act or refrain from acting on the basis of such information. You should seek appropriate professional advice based upon your particular circumstances.