Understanding the ins and outs of the process of divorce can be valuable in the present day. The fact of the matter is that whilst it may be accompanied by negative media presentation, divorce is a natural part of any family history and as such, it is something that needs to be more openly discussed, both to benefit families that are going through the process, as well as to provide resources for individuals who have had their own experiences with divorce in the past, either as a child, partner, or parent.
In today’s discussion, we’ll be looking at everything you’ll need to know about one of the major components of any divorce, this being property settlements.
Read on for our deep-dive into divorce property settlements.
Understanding Separation and Divorce
Before we delve into the construct of property settlements, it is important to fully comprehend what the terms “separation” and “divorce” mean in Australia.
Couples are required to be separated for a minimum of 12 months prior to being eligible for divorce. If a couple meets the criteria for divorce, they will need to apply to the Federal Circuit and Family Court of Australia to finalize a divorce.
What Is Property Settlement?
To put it simply, property settlement refers to the division of assets in the event of a divorce, annulment, or breakdown of a de-facto relationship. ‘Property’ refers to any capital assets, including everything from finances and superannuation, shared family homes, cars, liabilities, debts, and inheritances. It is important to note that divorce and property settlement are two different/unique legal processes.
How Are Property & Assets Split?
90% of the time, assets are divided by an agreement between you and your spouse or de facto partner. Generally, making an agreement without the court’s assistance will save you a lot of time, money, and frustration.
If you can agree on how to divide your property, you can:
- make an informal agreement
- make a financial agreement
- get a consent order from the court
Informal agreements can be made with or without the help of a lawyer. As such, it may make more sense to make a financial agreement or have consent orders made.
A financial agreement is a written document entailing how assets should be divided. Financial agreements can be made before, during, or at the end of your relationship. Your financial agreement does not have to be approved by a court, but strict rules still apply. Do note that you are required to obtain legal advice if you want to make a financial agreement.
Lastly, a consent order is a written agreement that is approved by the family court. Before the courts approve your agreement, they will take into consideration if your agreement is fair.
What If We Can’t Come To An Agreement?
In cases where couples or ex-partners are unable to come to a mutual agreement, couples can turn to the Family Court or the Federal Circuit Court to request financial orders.
The Court has set out a four-step approach it will follow when deciding property division:
- Establishing The Asset Pool
The first step involves identifying and valuing the assets, liabilities, superannuation, and financial resources of the parties. The property includes all possible interests of the parties whenever and however they are acquired. It also includes property presently possessed and property expected (i.e. an inheritance).
- Identifying Contributions To The Property Pool
Both financial and non-financial contributions can be considered within a property settlement. For example, one party may have made significant financial resources that allowed the purchase of a home. The other party may have contributed by looking after young children, caring for the home, and supporting the other party in their career development.
- Consideration Of Future Needs
The courts will establish what financial needs each party will have in the future. Some of the factors that affect this decision include age, health, ability to earn an income, responsibilities to care for dependents, and whether a new partner is financially supporting either party.
- Ensuring The Settlement is Just & Equitable
The Courts always strive to be fair to both parties in the event of property settlement. As such, they will do their best to ensure that the outcome is just and equitable – meaning a fair distribution of the assets, liabilities, and financial resources.
Last but not least, it is important to note that time limits apply when it comes to property settlements. A married couple has 12 months from the time their divorce is finalized to make a property settlement. De-facto couples have two years from the date of separation to make a property settlement.
In both cases, the court may grant an extension of time in exceptional circumstances but this is rare.
The process for dividing assets is a complicated affair and one that can differ from couple to couple, depending on your individual circumstances. We hope that this article has been insightful in providing you with some of the basic information you need to know about divorce and property settlement.
As always, the information provided is not a substitute for legal or other professional advice. We encourage couples to consult with an expert family lawyer for further insight into the matter.