Making decisions about a property settlement before or after separation can be stressful and challenging. There is no presumption that assets are divided equally or in any other way so it is important to seek legal advice and know your entitlements. How your property, mortgage, business, liabilities and superannuation are to be divided and dealt with needs to be carefully considered.
It is important to know the Court has wide discretion when making property orders and there is no one simple answer.
In making property orders, whether it be for married or de facto couples, the Family Court will typically follow 4 steps, known as the “four step approach”:
- Working out the net asset pool of both parties.
- Assessing the contributions of the parties to the relationship.
- Considering each party’s future needs. A court will take into account things such as age, health, care of children under the age of 18 and earning capacity; and
- In the final stage, the court will look at whether the overall settlement is "just and equitable" to both parties.
Step 1 — Identify the assets and liabilities
To determine the asset pool to be divided the Court will look at the parties net assets, which are the assets minus liabilities.
The Court will consider a variety of assets and liabilities including those which were acquired or incurred prior to the relationship, during the relationship and after separation. These could also include a party’s interest in family structures such as trusts.
In Western Australia, only married couples are able to split their superannuation as part of a property settlement. However, when determining the asset pool the Court will also take into consideration the parties respective superannuation balances irrelevant of whether they are married or in a de facto relationship.
Step 2 — What are the parties’ contributions
Once the Court has determined the parties net asset pool, they will then assess the contributions each party has made to the acquisition, conservation and improvement of the assets.
The Court will assess the parties initial contributions at the commencement of the relationship, contributions during the relationship as well as those made post-separation.
The Court will consider the following:
- direct financial contributions of the parties, such as income and wages.
- indirect financial contributions made such as gifts and inheritances from families; and
- non-financial contributions such as maintenance and repairs; and
- contributions made for the welfare of the family such as homemaker and parent.
Upon assessing both the financial and non-financial contributions of each party, the Court will then calculate each parties overall level of contributions on a percentage basis.
Step 3 — What are the parties Future Needs
The next step requires the Court to consider the parties future needs and whether an adjustment to either party is required. A party’s future needs may also be considered by the Court when considering Spousal Maintenance orders.
In making this assessment the Court will cast their mind to the provisions in Section 75(2) of the Family Law Act 1997 (Cth) for married couples or section 205ZD(3) of the Family Court Act 1997 (WA) for de facto couples.
Some of the most commonly considered future needs factors are:
- The age and state of health of each of the parties – How will the age and health of the parties affect their ability to work or receive income? Does one party have health concerns? Does their health impact or prevent them from working?
- Income, property and financial resources of each of the parties– Is there a difference in each parties’ income earning capacity?
- Whether either party has the care or control of a child of the marriage who has not attained the age of 18 years – if one party has the primary care of the children then this may affect their ability to work and receive income.
- The duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration – has one party taken the role of primary carer while the other was the primary income earner? In long relationships, the primary homemaker will often have reduced employment prospects due to the length of time spent out of the workforce.
- If either party is cohabiting with another person- if a party has re-partnered and lives with their new partner, their changed financial circumstances can be relevant.
Step 4 — Is it just and equitable?
After considering the above three steps, the Family Court must look at the overall orders and determine whether such orders are “just and equitable”.
Documenting a Settlement
You have a number of options available to you to document your final separation. For example, you can obtain court orders from the Family Court or you can enter into a parenting or financial agreement. Each of these options has advantages and disadvantages.
We can assist you to determine which option is best suited for your specific requirements and we can then draft the documents or review the documents if your partner has had them prepared by other solicitors.
Complex business structures
If you or your partner have an interest in a business that is operated by a family trust, partnership or company, then this adds a level of complexity to any proposed division of your assets. We specialise in unravelling complex business structures and we work closely with experienced barristers and accountants.
If other people are involved in the business, they might need to obtain independent legal advice in relation to their interest in the business. We can assist these third parties to determine if they should get involved in your separation.