When the unthinkable happens and you’re faced with the difficult task of dividing up your life, it’s normal to wonder – who gets what? After sharing your life with someone, it’s expected that you would share finances too. Regardless of how you and your ex-partner decide to approach the process of division, seeking legal advice will ease the stress of wondering what kind of financial position you will be in after the separation.
The Very First Financial Steps
As soon as you and your partner decide to separate, there are some practical considerations to address immediately. These do not have to be permanent but will be helpful as they relate directly to your financial living situation. You will need to determine:
- If you need to close any joint bank accounts or credit cards.
- If one party has no income, how will they be supported.
- Who will stay in your current shared residence and where will the other person live. It is important to know that if you leave your property, you do not lose your right to a share.
- Where your children will live and how they will be supported financially.
- Whether you will need to update your insurance policies.
- If you need to change the account holder name on any bills, mortgages, debts, rental leases etc.
After these matters have been attended to, you should speak to a reputable Family Law firm to get some professional advice from a trusted divorce lawyer about the rest of the process.
How Are These Decisions Made?
As mentioned in our complete guide to Navigating Family Law in Australia, decisions relating to the division of finances, property and assets are usually achieved under three scenarios:
- You and your ex-partner agree on how things are split without the involvement of the court.
- You and your ex-partner agree on how things are split and ask the court to register your agreement.
- You and your ex-partner cannot reach an agreement and require court intervention to seek financial orders (to be made and decided by a judge or magistrate).
Even if you and your ex-partner reach a compromise without court intervention, it is advisable for both of you to consult legal professionals and have them review your agreement before anything is signed or registered with the court to make sure it is fair in your individual circumstances.
What are Assets, Liabilities, and Debt?
An asset is something of value that can be converted into cash. Liabilities are types of debt or forms of financial burden.
Assets can encompass a range of items including; real estate, savings, investments, insurance policies, inheritances, shares, superannuation, or other tangible items such as cars, furniture or jewellery.
Liabilities include things such as mortgages, loans, credit cards and personal debts. It is important to remember that debt forms part of your overall property settlement regardless of whether you or your partner incurred it. However, debt will not be considered in circumstances where it has been incurred for personal use or gain, and not for the advancement of your relationship.
Unless there is evidence to the contrary (and under special circumstances), all items are considered to form part of the property settlement despite whose name is on the documents of ownership, who bought the asset, or who obtained the debt.
What Will I Get?
In order to determine who gets what in a settlement, it is usual practice for the value of the property and assets to be first added up. Then the value of the debts and liabilities is calculated. The value of the debt is then deducted from the value of the property which produces an amount commonly referred to as the net pool of assets. This amount is the subject of the property settlement.
After the calculation is made and the aforementioned net pool of assets is confirmed, the pool will then be apportioned between you and your ex-partner. How this is divided is based on a range of considerations. Primarily the law is interested in:
- The type of contribution each person made towards those assets; and
- the current and future financial circumstances of each person.
It is extremely important to note that this is merely a guide as to what the courts consider and how property is ultimately divided. There is no precise formula or calculation as every relationship is unique, and there are many factors that the law considers when determining what is a just and equitable outcome for both parties.
Some other factors include:
- Direct financial contributions, such as wages.
- Indirect financial contributions, such as gifts and inheritance.
- Non-financial contributions such as caring for any children, and homemaking duties.
- Current and future earning potential.
- Overall financial resources.
Whether a determination of the above is made in court or amicably between two people, a family divorce or separation lawyer can help you with the separation process. KPL Lawyers can assist you with drafting a legal agreement so that you don’t have to go to court. If you do have to go to court, KPL Lawyers will make sure you have the best representation possible.
A Special Mention to Superannuation
It is important to note that superannuation is now considered part of your property settlement. Superannuation splitting has become a considerable part of property settlement over the years as the laws have finessed.
Superannuation can be divided by:
- Splitting by agreement or court order.
It is worth noting that superannuation is still subject to superannuation preservation laws and cannot be released until you or your ex-partner reach retirement age.
- Entering a flagging agreement.
This involves deferring a decision until another time. The superannuation fund is unable to move funds until this flagging agreement has been lifted or satisfied.
- Leaving the superannuation, but accounting for it in the pool of assets.
You can choose to leave the superannuation in your accounts but have it considered in the calculation of the net pool of assets.
Superannuation can be a large asset in the division of property. The law surrounding this is complicated, so it is a good idea to get legal advice before entering into any negotiations to ensure you receive your fair share of assets.
If you can’t reach an agreement with your ex-partner and you need to make an application for financial orders, it is of importance to note the time limitations imposed by the courts. Married couples only have a period of 12 months from the official date of divorce to file an application for a financial order. De facto couples have two years from the date of separation.
If you miss the limitation period, you will not be able to make an application for financial orders without first seeking leave from the Family Court. The act of seeking leave means to ask the court for permission to proceed despite being outside the timeframes required for the limitation period.
Approving leave is not always guaranteed, so it is vital that you speak to a separation lawyer and seek proper family law advice well before the end of the limitation period. KPL lawyers can advise you on the best practice approach to filing a financial order to protect your assets in a fair and just way.
We Were Never Married – Does This Still Apply To Me?
If you were never married, your partnership might still be considered a de facto relationship which has the same legal rights and responsibilities as a marriage.
What are de facto relationships? The definition can be found in section 4AA of the Family Law Act 1975. According to the law, you can be considered to be in a de facto relationship with another person if:
- You are not legally married to each other; and
- You are not related by family; and
- After considering the circumstances of your relationship, it can be determined that you have a relationship as a couple living together on a genuine domestic basis.
In considering whether you have a relationship as a couple, the courts will consider a range of factors including:
- How long you have been together.
- If you are living together.
- Whether a sexual relationship exists.
- If there is any financial dependence/interdependence or if there are any arrangements to support one another financially.
- Who owns the property and who makes contributions.
- Evidence of a mutual commitment to a shared life.
- Whether your relationship has ever been formally registered with a state registry.
- If there are any children, and how they are cared for and supported.
- How your relationship is viewed in the public eye.
It is not common knowledge that a de facto relationship can exist even if one person is already legally married to someone else or in another de facto relationship. That is to say, de facto relationships are not necessarily mutually exclusive. This simultaneous relationship status can have an impediment on the division of assets, as both parties in the marriage and de facto have a right to claim. In these situations, it is imperative to seek legal advice from a divorce or separation lawyer.
If you need advice or would like to discuss your options, speak with one of our team members for some initial advice on how to prepare for your life ahead. Arrange your consultation here