Property Settlements – Married & De Facto Couples

The majority of separated couples reach negotiated agreements in respect of property settlements without going to court.  Generally, they will enter into Consent Orders or a Financial Agreement to document the settlement and determine their respective obligations and entitlements.

The following discussion applies to married couples, and also applies to de facto couples (both opposite sex and same sex) who separate on or after 1 March 2009.  This is provided that the de facto partners have cohabitated for at least two years, or there is a child of the relationship, or a party has made substantial contributions and would suffer serious injustice.  A minority of separated couples are unable to reach negotiated agreements.  One or both parties will make application to a court for property settlement.  Only between 5–10% of applications filed for property settlement proceed to a final hearing.  The other 90–95% will reach a negotiated agreement during the course of court proceedings. Preparation of a well planned negotiating strategy can assist spouses in reaching a satisfactory settlement promptly and without unnecessary conflict. This should include considering what dispute resolution process might be most effective  – mediation, collaborative family law, arbitration, lawyer-to-lawyer negotiation, direct discussion between the spouses? The dispute resolution process chosen has a big impact on the quality of the agreements reached.

An application for property settlement can be commenced any time after separation, but must be commenced by a married spouse within twelve months after the granting of a divorce. After that time period, special leave must be given by the court.Generally, a de facto spouse must make an application for property settlement or spousal maintenance within two years of separation. A court application cannot be made by a de facto partner more than two years after separation without special leave from a court.

In most cases, the court follows four steps in deciding a fair property settlement.

Step 1:  Identifying and valuing all property and debts of the parties

Generally, all property and debts of each party (whether individual or joint) form part of the assets which will be available for division – irrespective of whether the asset was received or the liability incurred before or after cohabitation or separation. The asset pool should include all possible tax liabilities and the costs of selling or transferring properties.

Step 2:  Assessing contributions made by each party to the property of the relationship including:

  • direct financial contributions such as pre-marital assets, inheritances or gifts, compensation payments etc;
  • indirect financial contributions.  For example, if one party’s income is used to pay household expenses whilst the other party’s income is applied to pay the mortgage or to savings;
  • non-financial contributions such as home-making and care-giving for children, or improvement of property.  It is difficult to give an exact financial value to non-financial contributions.  Contributions as home-maker and care-giver to children, however, are generally recognised by the court in a substantial way.

Step 3:  Consider the future financial needs of each party

Section 75(2) of the Family Law Act requires a court to consider a number of factors including:

  • the age and state of health of each of the parties;
  • income, property, and financial resources of each party and their physical and mental capacity for appropriate gainful employment;
  • whether either party has the care of a child who is under eighteen years of age;
  • commitments of each of the parties necessary to enable them to support themselves or a child or other;
  • the responsibilities of either party to support any other person;
  • any entitlement of either party to a social security benefit or entitlement under a superannuation fund;
  • the extent to which one party has contributed to the income, earning capacity, property or financial resources of the other;
  • the duration of the marriage and the extent to which it has affected the earning capacity of either party;
  • any child support payable by one party to the other and whether it is, in fact, being received;
  • any other relevant facts or circumstances.

Step 4:  Consider how each party is to receive the entitlement determined under Steps 1, 2, and 3

That is, how are the assets of parties to be distributed between them.  In many cases, it is necessary to sell a property to allow each party to receive their entitlement from the sale proceeds.

Asset by asset approach

Generally, the court takes a global approach as outlined in the four step process above.  In a short relationship without children, the court may take an asset by asset approach.  This involves considering the contributions made by each party to each individual asset. Less weight is given to the differing future financial needs of each party.

Property settlements

The majority of separated married couples reach negotiated agreements in respect of property settlement.

In the absence of agreement, either spouse may make an application to a Court seeking division of property .

Spouses should obtain carefully considered legal advice as to the likely Court determined outcome whilst negotiating, and prior to commencing Court proceedings.

Preparation of a well planned negotiating strategy can assist spouses in reaching a satisfactory settlement promptly and without unnecessary conflict.