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Divorce and Property Settlement

When the court grants a divorce orders this means that two people who are married are no longer married. A divorce is a separate legal proceeding from a property settlement and a parenting matter. Commonly, when parties divorce, there are disputes to resolve around what arrangements should be made for the children and how property should be divided. This article sets out the process for determining a property settlement.

Property settlements

To determine what property the parties to a relationship are entitled to after separation, a five-step process must be followed.

1. Is it just and equitable to make an order?

Firstly, the court will consider whether it is just and equitable to make an order. To do this, the law looks at the nature and length of the relationship. If a relationship is short and parties have kept their finances largely separate, it may not be just and equitable to make an order. If a relationship has been long and/or there was a high level of financial interdependence, it will be just and equitable to make an order.

2. Determine the asset pool

Secondly, parties must determine what assets are available to be split. This is done by adding the current value of all assets, including superannuation, and deducting any liabilities. It is not relevant whether or not the assets or liabilities are held in one name or joint names. They all must be included. If there is a dispute as to the value of any items, an expert can be appointed to have those items valued.

3. Determine each party’s contributions

Thirdly, the contributions of each party need to be evaluated. It is recognised that people fulfil different roles in relationships, with one person taking on responsibility for being the primary income earner and the other being primarily responsible for being a homemaker or performing parenting duties. In broad terms, the law generally values both of these roles equally. Therefore in long-term relationships contributions are often relatively equal unless someone came into the relationship with significantly more assets than the other or received a significant financial windfall during the relationship. After evaluating contributions, the result should be expressed in percentage terms. E.g. 55% to 45% if someone has contributed slightly more than the other during the relationship.

4. Determine future needs

Fourthly, future needs are considered, particularly if those needs are unequal. Some examples of future needs being unequal would be where the care of children is disproportionate, where someone has expensive healthcare needs, where there is a significant income disparity or one person is significantly older than the other. There are many other types of future needs that may impact upon a property settlement. After examining future needs it may be appropriate to adjust the percentage reached from looking at contributions to allow for any disproportionate future needs.

5. Determine the outcome

Fifthly, after reaching a final percentage split of the assets and applying it to the net asset pool at the first step you can work out in dollar terms what each of you is likely to receive. It then makes a value judgement to determine whether or not any further adjustment is necessary in order to achieve an appropriate result. Most cases do not require any further adjustment to achieve a just and equitable result after the percentages are calculated by looking at contributions and needs.

The final step to be undertaken is to determine who will keep what assets and liabilities. In most cases, each party will keep either what they own or what they have been using at the time of separation. If that position means that one person has more assets then they should, a cash adjustment is used in order to bring the final split of assets back into the correct proportions. It should be said that you do not need to wait until your divorce is finalised to split or divide your assets. It can be done immediately following separation.

If you require legal advice or representation in any legal matter, please contact Armstrong Legal.

Michelle Makela

This article was written by Michelle Makela

Michelle has over 15 years experience in the legal industry, working across commercial litigation, criminal law, family law and estate planning.  Michelle has been involved in all practice areas of the firm and in her personal practice has had experience in litigation at all levels (State and Federal Industrial Tribunals, the Supreme Court, Court of Appeal, the Federal Court, Federal...

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