Property settlement: separation and divorce
How to work out who gets what
There’s a saying about divorces…they can get messy.
The breakdown of a marriage is often a time of anxiety and mistrust, where composed negotiation with your soon to be ex-spouse can often take a back seat. But if you take a moment early in the separation process to pause and remain calm, reaching an early financial agreement with your spouse can have many advantages.
Sitting down and working out how you will divide your assets allows you both to:
♥ Make your own decisions
♥ Reduce the financial and emotional costs of legal proceedings
♥ Keep on a good footing your continuing relationship as parents (if you have children)
♥ Move forward and make a new life for yourself
♥ Improve communication with your former partner so you can better resolve disputes in the future.
Having a financial agreement means knowing exactly what each of you will get, whereas, by going to court, there is uncertainty in waiting for a judicial officer to decide for you. Plus, court proceedings can be long, stressful and costly for both of you.
(However, if you feel that you’re not going to get a fair deal out of this sort of approach, then have a chat with a lawyer or seek some legal advice from Family Relationships Australia on 1800 050 321)
I will be frank and say that when couples are fighting over assets, lawyers get big paydays. Try and be reasonable in any early negotiation over assets and give ground where necessary as a long winded legal battle will set you back 10s of thousands of dollars…each!
One property fight in 2018 left the two parties with bills of near a quarter of a million.
Who needs that?
The Family Law Act allows you to make financial arrangements:
• before marriage (or de facto relationship) sometimes known as a “pre-nup”;
• during marriage (or de facto relationship), and before separation;
• during marriage, and after separation; or
• after divorce (or the end of a de facto relationship).
Needless to say, you should always get legal advice before entering into ANY financial agreement.
It’s important to understand that there is a maximum time limit for organising a property settlement once your divorce has been granted.
There must be an Application to the Court for property settlement filed with either the Federal Circuit Court or the Family Court within one year of your Divorce becoming “absolute”.
Your divorce becomes “absolute” when the Court issues you both with a Certificate of Divorce. This normally happens 1 month and 1 day after the Divorce hearing.
(Please note you don’t actually have to attend any hearing, all the divorces are granted in a simple administrative process by the court.)
If you haven’t done your property application it within that timeframe you can make an application to the court for an extension of time by applying for “Leave to Proceed”. This is an application to the court with an affidavit explaining why you are running late.
However, you must have a good reason for wanting an extension, as leave to proceed with a property settlement outside the time limit is only be granted in limited circumstances.
What Can financial Agreements Cover?
Financial agreements cover things like:
♦ How, in the event of the breakdown of the marriage, all or any of the property or financial resources (including superannuation entitlements) of either or both of you is to be dealt with upon separation and/or divorce.
(See the section underneath about ‘super splitting’.)
♦ The maintenance (financial support) of either of you after divorce.
♦ And even issues like who gets to keep the treasured pets.
These agreements need to be signed by both of you, and it’s important that you both have separate legal and financial advice before signing.
The government is strengthening the laws (as of Mar 2016) to make it more difficult to challenge financial agreements. Take care to ensure any financial agreement is well thought through, based on legal advice and reflects what both of you want.
Here’s a great video from our friends at Legal Aid, explaining what you should know about your property and financial matters, what to expect from a property settlement and how to make dividing your property less stressful.
I am sure many of you are thinking that this all looks very calm and collected and a bit unreal when you both might be unhappy with each other.
But try to make an effort to sit down and work out who gets what and how maintenance and child support are going to be organised. It is definitely a better option than going to court. Because financial agreements are private documents between you and your spouse, the court does not need to know about them.
However, some couples choose to get the court’s stamp of approval by filing their financial agreement with the court by getting what are called consent orders.
You and your former spouse can apply for consent orders to be made in the Family Court without going to court. Consent Orders are normally drafted by both of you in consultation with your lawyers.
These orders deal with things like – spousal maintenance, splitting of superannuation and the transfer or sale of property. (The order can also include child maintenance)
You won’t have to go to court if you both have agreed on the drafted orders. Once the court approves them, they have the same strength as a court order made by a judge or magistrate after a court hearing. Any breaches of the consent order is taken very seriously by the court who may require you to appear before it and explain why the order was not followed.
Here’s a great brochure on applying for court orders .
It’s also important to note that you must apply for this order within 12 months of your divorce order taking effect. After this time, you’ll need the Court’s permission to apply.
What if we can’t agree on financial and property or maintenance?
As I mentioned, divorce can lead to difficulties in sorting things out and where it’s become impossible to get an agreement or one that is fair you can organise with a solicitor to apply to the court for orders. These orders will be different to the Consent Orders because they are prepared because there was no mutual consent or agreement between the two of you.
Now it’s important to know that the court would rather you both work things out than have to drag your financial and other disagreements through the court, adding more time and cost.
So where there are disagreements, before any application can be prepared, you both must make a genuine effort to resolve your differences on finance and maintenance through family dispute resolution.
The Family Court requires people applying for financial orders to follow pre-action procedures including dispute resolution before being able to file an application. In the Federal Circuit Court people are encouraged to resolve issues they don’t agree about before filing any applications. In many cases parties will be ordered to attend dispute resolution before they file with the Court.
(The same applies for couples who want a ‘Parenting Order’, because they can’t agree on how the post separation/divorce parenting will be done)
You can’t avoid this family dispute resolution. It is part of a process you both must go through to see if things can be worked out before any orders are drafted by your solicitors.
If things still don’t get resolved you can ask for financial orders from the court.
Before your case is heard in court
There is a much emphasis placed by the family law courts on resolving financial agreements BEFORE having a court hearing, which can end up being costly and emotionally draining.
The first thing that happens is that the court will ask for a case assessment conference. There are certain documents you must bring. The conference provides you both with an opportunity to reach an agreement, with the help of a registrar.
Registrars are experienced family lawyers who work for the court. They are appointed to perform certain tasks such as grant divorces, sign consent orders and determine the next step to take in unresolved financial disputes. They’re not there to give either of you legal advice, but can talk with you about the legal principles that are applied in deciding a case.
If you still can’t reach an agreement the registrar will either recommend you have further mediation or advise what will happen next, which could be a conciliation conference or progression of your dispute to a court hearing.
Where an order has been made for a conciliation conference by the court, attendance by all parties involved is compulsory. Here’s some information on conciliation conferences.
At the conciliation conference, the registrar will again look at the case from both sides and help you explore options for settling your case without further legal action.
What financial orders can you ask for?
Now if after all that negotiating you still can’t resolve your dispute you ask the court to consider your matter and make decisions. Here’s some information about preparing for court.
You can apply for orders relating to:
♦ Property – to say how your property, income, financial resources and debts should be shared between the two of you.
♦ Maintenance – to provide financial support for a (former) husband or wife, or (former) de facto partner
♦ Child support – but in certain circumstances. (These applications are generally dealt with by the Federal Circuit Court.)
The court has a 4 step process for assessing any financial settlement application:
Step 1 – Identifying and valuing the assets, liabilities and financial resources of both of you
This includes all assets, liabilities and financial resources, whenever and however acquired. In many cases this is a simple part of the process. However, in some cases, particularly those involving businesses, the valuation exercise can be quite complex and require the involvement of specialist experts.
Step 2 – Assessing both of your contributions
This involves the assessment of the contributions made by you and your former spouse during the relationship.
This might include:
∗Direct and indirect financial contributions to the property of the parties
∗Direct and indirect non-financial contributions to the property of the parties; and
∗Contributions to the welfare of the family including contributions in the capacity of homemaker or parent.
Step 3 – Assessing the future needs of each of you
Which will include such things as:
♦The age and state of health of each of the parties;
♦The income, property and financial resources of each of the parties and their capacity for employment;
♦Who has the care of your kids that are under the age of 18 years;
♦Any particular commitments necessary to enable a party to support him or herself (or any other person that party has to maintain)
♦The eligibility of either party for a pension superannuation;
♦The standard of living that is reasonable in the circumstances;
♦The extent to which the earning capacity of a party has been affected by the relationship.
The Court considers the above points and any other relevant facts and then decides if there ought to be an adjustment from a 50-50 position (both parties receiving equal shares) to favouring one of the parties to compensate for any difference in their future circumstances.
Step 4 – Is the proposed division of property fair to both parties?
The court, after those first 3 steps, then decides if the proposed division of assets is fair to each of the parties. This assessment is done by taking into consideration all the circumstances of your case.
Planning to file for financial orders but also need urgent child support?
Regarding child support, you should seek legal advice or contact the Department of Human Services (Child Support) on 131272 before making an application in the Federal Circuit Court.
For more information visit the Department of Human Services (Child Support) website.
It never fails to surprise me how many people believe that their super is theirs alone and can never be touched, even when divorce or the end of a relationship is near. However, when it comes to property settlements, it’s all about getting an equitable or fair division of ALL the assets. This means that a spouse may receive some of their partner’s super.
In a nutshell, when it comes to your assets, everything is on the table.
When it comes to super you do have the option of sorting out how the division or ‘split’ of your super should occur. Couples who have separated are able to make an agreement – known as a superannuation agreement – about how any superannuation that either party will receive is to be split.
(WA is exception here, with de facto couples in Western Australia not being subject to the superannuation splitting laws.)
By the way, if you don’t get legal advice the agreement won’t be binding on the trustee of the superannuation fund.
If you are a de facto couple, you can both make a superannuation agreement either before or during your relationship about how any superannuation will be split on the relationship breakdown. Because superannuation is different to other property, there are special rules about what a superannuation agreement has to say. Provided that a superannuation agreement complies with the legal requirements detailed in the superannuation splitting laws, the agreement is binding.
And when it is binding, the trustee of a superannuation fund must by law implement your agreement and the court is not able to make an order about superannuation.
Here’s a helpful superannuation info kit provided by the Family Court.
What does my payment splitting agreement have to say?
The payment splitting agreement has to say how the superannuation interest is to be split in order for it to operate effectively. Generally, a payment splitting agreement must specify:
• An amount – known as the ‘base amount’.
• A method for calculating the base amount, or a percentage that is to apply to all splittable payments made in respect of the superannuation interest.
And your entitlement under any payment splitting agreement depends on what the agreement says.
What if we can’t agree on super splitting?
Once again, if you are both unable to agree, then the court is able to make an order, as part of a property settlement order, about how any superannuation is to be split and that order is binding on the trustee of a superannuation fund who must comply with it.
Pets can often enter the negotiation when property arrangements are being worked through.
It is possible to organise formal custody agreements and/or visitation rights so time spent with Fido or Miss Whiskers is fairly divided.
It is best to draft an agreement between yourselves, as these matters are seldom heard or allowed in what are already congested family courts. If you need assistance in drafting this we can help. Contact us to discuss your needs HERE.
If you are having difficulty coming to any financial agreements then it is best to sit down with your lawyers and get them to help work out something that is mutually acceptable.