How does financial settlement work?
At the end of most relationships it will be necessary to formalise the rights and entitlements of each party to sever all financial relationships between you and safeguard future property. Contrary to popular belief, you are not automatically entitled to a 50/50 split of assets. We take you through a four-step process to determine legally who is entitled to what, how to get what you are entitled to and the likely legal costs involved to settle your matter quickly and correctly. Time limits do apply to property settlements, so starting this process as soon as possible can avoid unnecessary stress.
The length of this process varies depending on the circumstances, and if possible we try to keep the property settlement out of court. Litigation is expensive, time-consuming and can put unnecessary pressure on already strained relationships. We are experienced in moving this process along for you as quickly and smoothly as possible.
Step 1 Assess the Asset Pool
The first step in dividing assets is to list all of the assets and liabilities of each partner. Assets can include real estate, bank accounts, furniture, shares, pre-marital property, partnership in a business, inheritance, long service leave, and in some cases, assets already sold. Liabilities can include credit cards, personal loans, mortgages, and tax implications. It does not matter whose name an asset or liability is in, all are included.
Once we have the schedule of all assets and liabilities, we deduct the liabilities from the assets to obtain the net asset pool. That is the asset pool capable of division, and the percentage of that pool you are eligible to receive is determined by the following steps.
Step 2 Assess the Contributions
Firstly, we need to understand the history of your relationship as it relates to the assets and liabilities. Contributions made at the start of the relationship, during or even post-separation need to be considered and aren’t just financial.
Direct financial contributions include if someone paid the deposit for the house, mortgage repayments, or made bank savings alone, for example. Non-financial contributions can include work performed on a property, or being a homemaker or parent.
With the above information, we can give guidance on whether one party or another is likely to be given a higher percentage due to their contributions.
Step 3: Future Needs Factors, Section 75(2)
Next, the court will look at each party’s needs after the relationship finishes, which falls under Section 75(2) of the Family Law Act. This particularly considers the age and health of each party, how they will support themselves, whether one party has the care and control of the children, any disparity of income or financial resources, the effect of the marriage on earning capacity, child support commitments, or any other factors the court dictates to be taken into account.
Step 4: Orders for a Just and Equitable Outcome
Once we establish and consider the result of the above three steps, we consider if that result would in the circumstances be “just and equitable.” It is important for both parties to feel the settlement is fair, to avoid resentment, and allow you both to move on.
As part of this step, we assess what practical order is best achieved for your specific circumstances. Rather than simply selling everything to divide in accordance with the percentage split determined, we explore options that may provide a more equitable outcome. Most property financial settlements are resolved with a consent order, formalising all aspects of the division of property and assets. In some cases, however, a Financial Agreement may be a better option.
How can we help you with Property Financial Settlement?
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