A property settlement is a formal way of dividing the assets, liabilities and superannuation entitlements owned by you and your former partner. For many, a property settlement signifies financial and emotional freedom. It is a severance of financial ties that will provide you with the independence you need to move on with your life.
How are assets divided in a divorce or separation?
There is no concrete or mathematical method of calculating how much of the total property you will be entitled to on separation. However, we do have a list of factors that we need to consider.
The general method used in practice (although it might not be appropriate in all cases), is a 4 step process as follows:
- What is the net value of the property pool?
- How have you contributed to the asset pool?
- Are there special circumstances causing you (or your former partner) to have greater future needs of financial support?
- Is the proposed division justified in all the circumstances?
In most cases, the concept of “contributions” will make or break your case. Contributions come in many shapes and sizes. The greater the contributions, the greater the likelihood of being entitled to a bigger share of the total property pool.
Contrary to popular myth, the starting position is never a 50/50 division. In most cases, the starting position is a question - what were each party’s contributions to the acquisition, conservation or improvement of the property owned solely by you or your former partner, or both of you jointly.
Contributions can be:
- Financial Contributions: examples of financial contributions include the assets brought into the relationship by each party when you started living together; income earned throughout the relationship, inheritances, gifts received by each party, and any other monetary contributions.
- Non-financial Contributions: the classic example of a non-financial contribution is labour spent renovating a house, which has increased the value of the property. These are contributions that did not involve the injection of money, but did contribute to maintaining or increasing the value of the property owned between you and your former partner.
- Contribution made in the capacity of homemaker or parent: the contribution of a homemaker and/or parent is well recognised in modern case law. The general attitude is that the contribution made by the spouse as a homemaker and parent should (in most cases) be treated equally as the efforts of the other spouse who is thus freed to pursue their own outside employment.
After having considered the contributions of each party, the final consideration is whether you or your former partner requires future financial support, for example due to the care of the children, illness, age, earning capacity, etc.
What is property settlement process in a separation?
Property settlements can be achieved without necessarily going to court. Indeed, most property settlements occur outside of court and after private negotiations.
There are four ways of recording a formal property settlement:
- Hearing/trial in Court;
- Consent Orders; and
- Binding Financial Agreement.
Which of the above methods is most appropriate for you will depend on whether you are in agreement about how the property is to be divided. If you cannot agree on how the property should be split, you may need the assistance of a Court to make the decision for you. This means that you will have make an application to start a case. Once a case has been started, you can end the case at any time if you both agree to the terms of the settlement. If an agreement still cannot be reached, how your property will be split will either be determined by a Judge (after a hearing) or by an arbitrator (after arbitration).
If you have come to an agreement, you can avoid the stress of a court case altogether. The agreement can be recorded by way of consent orders lodged with the court. This is an administrative process and will not require you to attend court. The Court will review the application and if approved, will issue formal orders.
Alternatively, should you wish for greater scope of negotiation, perhaps to deal with issues related to your property but not necessarily within the scope of Court order, you can have your agreement recorded in a Binding Financial Agreement. This agreement is a private contract between you and your former partner, and has to meet certain legal requirements.
Talk to our Property Settlement Lawyers about the division of your assets in your separation.
Our experienced property settlement lawyers in Sydney & Parramatta can provide discrete and practical legal support to help you make realistic and informed decisions. We are motivated to achieve a fair result, without unnecessarily worsening your existing family relationships. We understand that your first priority is to achieve smooth and discrete resolution of your family law matter.