Property Acquired After Separation But Before Settlement

It is important to remember that the moment you separate from a partner or spouse is not necessarily the moment that your finances cease to be entangled.  Often one partner acquires property or receives income after separation, and they are later surprised to find that that money or property is included in the asset pool considered at the property settlement. This article examines how courts have dealt with property acquired after separation but before settlement.

Some recent court decisions have dealt with property acquired after separation but before settlement.  These cases serve as warnings to people currently separated who have not finalised property settlements with their former partners.

Property acquired after separation in Calvin v McTier

The 2017 decision of Calvin v McTier FacCAFC 125 was a case decided by the Full Court of the Family Court on appeal.  The husband acquired property after separation by way of an inheritance.  The inheritance was acquired four years after separation.  He argued that this should not form part of the property pool considered for distribution between the parties.  The inheritance was for $430,686 and was about 32% of the total assets which were about $1.3 million in total.

At trial, the contributions of the parties were assessed. The Judge found the husband had contributed more than the wife.  The higher contributions of the husband were by way of the inheritance and initial contributions that the husband had made of $580,000. The trial judge found that the property contributions should be considered to be 75% from the husband and 25% from the wife.  The trial judge then considered that an adjustment should be made for the future needs of the wife so that the division of property would be 65% to the husband and 35% to the wife.  The husband appealed this decision.  The Full Court of the Family Court heard his appeal.

The Full Court found that it was required to consider all property that parties held at the time of the hearing, including property acquired after separation, and rejected the husband’s argument that the inheritance should not be included due to the lack of connection with the relationship. Interestingly, the Full Court did note that it does still hold discretion in how it chooses to deal with property acquired after separation.  It should also be noted that the husband did not assert the argument that including the inheritance in the property led to a result that was not just and equitable. It is possible that if this argument was led by the husband, a different result for the distribution of assets might have been achieved.

This decision of the Full Court of the Family Court has been approved in the later decisions of Holland & Holland [2017] FamCAFC 166 and Widmann & Widmann [2017] FamCAFC 602.

Income received after separation: Trask v Westlake

The decision of Trask v Westlake [2015] FamCASC160 concerned income received after separation by the husband in the former relationship.  The husband earned $9 million in income through a redundancy package between the date of separation and the date of the trial relating to the property settlement.  The $9 million was more than the total property pool prior to the husband receiving the redundancy package, which was $7 million.

The couple’s marriage lasted thirteen years, and they had four children together. Throughout the marriage, the husband was the primary income earner.  The wife throughout the marriage and after separation had been the primary carer for the couple’s children and homemaker.

The trial judge considered that the parties contributions to the marriage were equal.  As the husband had a higher earning capacity than the wife, and the wife had greater financial needs than the husband, the Judge determined that the wife should receive an additional 10% of the asset pool.

The husband was unsuccessful in appealing the decision to the Full Court of the Family Court of Australia.  This court noted that his income earning capacity was not only earned through his hard work and skills and abilities but also through the assistance of his wife through the homemaking and caring she provided for his children during the relationship and post-separation.

Time limits

There are time limits that do apply to end the financial relationship between couples who have separated or divorced.  For a couple which divorces, being divorced for twelve months will end the financial relationship.  For a de facto couple that separates, being separated for two years will end the financial relationship between them.

It is important to apply for the property adjustment to be made between ex-partners within these timeframes.  It is possible to apply outside of these timeframes, but permission from the court needs to be obtained, and this is not always given.

Finalise settlement early to protect property acquired after separation

It is always a good idea to reach a property settlement as soon as possible with your ex-partner or spouse after separating.  It should be remembered that you can work to achieve a property settlement with your ex-partner as soon as you separate.  You could even be living in the same residence while separated when you finalise your property settlement.  Finalising your property settlement early on will ensure that property acquired after separation or income received after separation will not be mixed up in the property pool under consideration for property settlement.

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