Time limits do apply for a property settlement. For married couples, an application must be made within 12 months after divorce and for a de-facto relationships a time limit of 2 years from the date of separation applies.
The Court has recently made a decision that prior to seeking an alteration of property interest the court must first make a determination if it is just and equitable to proceed with dividing the assets between the parties. It is really rare that a court will make a determination that it is not just and equitable to do a property division.
Upon making the determination that it is just and equitable for a property division the court will adopt a 4 stage process to determine the entitlement in a property settlement, namely: –
- Step 1 – Identify and value all assets, liabilities and superannuation of the parties;
- Step 2 – Identify the contributions made by each party
- Step 3 – Review the future needs and resources of each party;
- Step 4 – Implement the just and equitable orders.
Step 1 – Identify and value all assets, liabilities and superannuation of the parties
The first step is to determine all of the assets, liabilities and superannuation in the property pool. All assets as at the time of reaching an agreement is to be taken into account. All assets of the property pool are to be taken into account regardless of which party’s name the asset may be in.
There is the misconception that if an asset is acquired after separation is not included in the property pool. This is not the case. Parties have an obligation under the Family Court rules to provide full and frank disclosure to the other party regardless of when the asset was obtained.
Assets are taken to include real property, motor vehicles, money in the bank, bonds, shares in private companies, shares in public companies, furniture, artwork, interests in trusts, and superannuation.
Liabilities are debts of the parties and include include mortgages, personal loans, HECS, fee help, credit cards and car loans.
In order to get to the net pool of assets we total the assets and subtract the liabilities which provides the total figure for distribution between the parties.
Step 2 – Identify the contributions made by each party
We then look at the parties’ contributions made to the asset pool. The contributions made can be financial, non-financial and role as parent homemaker. The contributions made can be directly by the party or indirectly such as an inheritance received by one parties family members or a gift to one party by family members.
The contributions made can be prior to the relationship, during the relationship or post separation.
There is no presumption in Australia that the parties have contributed equally to asset pool.
Step 3 – Review the future needs and resources of each party
The next step is to take into consideration the parties future needs. This step look at the following: –
- Earning capacity
- Whether one party has primary care for the children
- Financial resources
- New relationships; and
- Any other relevant information.
Step 4 – Implement the just and equitable orders.
The court will then step back and look at the practical effect of the orders and consider whether it is just and equitable in circumstances in the overall property division and settlement structure.
Under the Family Law Act, if parties reach an agreement, there are only two ways to document your agreement and sever your financial relationship with your former spouse, that is Consent Orders or a Binding Financial Agreement.
Consent Orders are an order of the Court. The Consent Orders are drafted by a solicitor and both parties execute the document. The Consent Orders are then filed in Court. You are not required to attend Court and the order will be made in chambers if the agreement is just and equitable,
A Binding Financial Agreement (“BFA”) is a formal agreement between parties which is prepared by a solicitor. Both parties must have independent legal advice as to the effect of the agreement and the advantages and disadvantages of entering into the BFA.
There is a common misconception that finalising a property settlement without legal advice and having the document drawn up on a statutory declaration between the parties is binding however this is incorrect and can cause a lot of time, money, stress and a lot of heartache in the future.
It is important you seek advice as to your individual circumstances and find a solution tailored to your own unique set of circumstances.