Dividing your Assets and Spousal Maintenance
Division of Property between Spouses
When you are sure that the relationship is over, it is only natural and often necessary that you will want and need to divide your property. There is also another more pressing reason that you may not have considered, and that is, that until you separate your assets legally by way of Consent Orders or Binding Financial Agreement, everything you possess or purchase moving on from the relationship is part of the marital assets and years after separation your newly purchased home or car could be transferred to your ex-partner as part of a family law settlement. This is not a fact that most people are aware of and should certainly be a motivating factor in formally and legally dividing assets.
In any event you may need that division to happen quite soon after the separation so that you are able to move on and support yourself and your children financially. Quite often your main asset will be the family home and one or both of you may need to rent until the home can be sold. You may also want to explore options of retaining the family home and residing there with the children.
It is to your advantage if you can agree on how to split your assets, especially if the family home needs to be sold. If you cannot agree, you can engage in mediation, however, if that is unsuccessful the matter would have to be decided by the Family Court and this could take a number of years to be decided on, which may prevent you from moving on financially. In addition, having the matter decided by the Court is a costly process.
In order to reach an agreement, you will likely have to enter into some negotiation with your spouse. To successfully negotiate you should be aware where you stand legally, and this is where our family lawyers can assist you. All too often we see clients agreeing to a division of property that is not in their interest or what they are legally entitled to. Such an agreement has usually been based on previous advice that they have been given by friends and family. Our family lawyers will always strive to help you obtain the best possible result based on your circumstances and preferably saving you fees by seeking this through considered mediation and negotiation, before resorting to Court.
Do I have to formally divide property through legal means? Can’t we just divide it up ourselves?
There is no requirement to have a formal agreement for the division of property, however, if you fail to enter into a formal arrangement, you never truly divide your assets and you could remain liable to your spouse for years to come. In addition, in order to avoid stamp duty, or capital gains tax, on a transfer of property from both of you to just one of you, you will need a formalised agreement in place.
There are two types of formalised agreements that can be put in place, namely a Binding Financial Agreement or Consent Orders. Both are discussed in more detail below. If you cannot agree on a division of property, then you will have no option but to go to Court.
You are completely free to decide upon any division of property that you desire, such as 50/50 60/40 or 100/0. However, you should be aware that your spouse can challenge any agreement at a later stage on the basis that it has caused significant financial hardship to themselves or a child. You should aim for a fair agreement to prevent this.
During the negotiation stage is it useful to be aware how the Court would divide property, should parties not be able to reach an agreement. Whilst each case should be considered unique, the general steps adopted by the Court are as follows:
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- Identify and value the assets and liabilities that you and your spouse hold either individually or together;
- Assess each of your financial contributions to the property held, either by way of purchase, maintenance or improvement;
- Assess each of your non-financial contributions made by either of you to the welfare of the family, including any contribution made as homemaker or caregiver, i.e looking after the home and caring for children; and
- Consider the future needs and resources of each of you, such as age, health, capability of finding gainful employment; income; assets and financial resources; who will be looking after the children; the standard of living that is reasonable for each party; and among other things the duration of the marriage.
You are only able to negotiate if both you and your spouse have disclosed all relevant information to each other, and the Family Law Act requires that you provide full financial disclosure to each other. As such the first step in dividing assets is to provide full financial disclosure to each other.
Identifying and valuing the assets and liabilities
You really need to consider everything at this stage in order to reach a fair settlement, including all your assets which can include: property owned when you entered the relationship; inheritances; property obtained after separation; superannuation; compensation payments, and damages paid during the relationship; redundancy payouts; loans, mortgages, credit cards, life insurance policies, large debts coming into the relationship; any family loans or advantages – such as family pledge for a mortgage, or a loan never repaid, which is essentially a gift; and Value in a business, including tools of the trade can also be considered;
Assessing the Contributions
Once full financial disclosure has been provided by you and received by you, the next step our family lawyers take is to assist you in in assessing each person’s contributions, both financial and non-financial which can include, any property owned by each person before the relationship commenced; Any gifts received from parents; compensation payments and any increase in property value; and non-financial contributions such as homemaking, looking after children and home renovations.
Assessing future needs and resources
Once full financial disclosure has been provided by you and received by you, the next step our family lawyers take is to assist you in in assessing each person’s contributions, both financial and non-financial which can include, any property owned by each person before the relationship commenced; Any gifts received from parents; compensation payments and any increase in property value; and non-financial contributions such as homemaking, looking after children and home renovations.
Division of Property by Agreement
If you can agree on a division of property and avoid asking the Court to make that decision for you, then the following methods can be used to formally divide your assets and liabilities:
- Binding Financial Agreement, or
- Consent Orders.
1. Binding Financial Agreement
The Binding Financial Agreement is essentially a contract between yourself and your ex-partner. In the Agreement, you can set out any terms you wish to agree on in relation to the division of property and/or maintenance on a break-up.
In order for the Agreement to be binding, you must each receive independent legal advice and a certificate of that legal advice must be attached to the Agreement stating that you have received independent legal advice. The document is never registered with the Court, however, it would be difficult to have it set aside at a later stage, provided it has been drafted properly. The Binding Financial Agreement only covers financial issues and would not be suitable to cover issues dealing with parenting.
As the Binding Financial Agreement is not approved by the Court it is necessary for both parties to be independently advised. The Binding Financial Agreement can be set aside if both parties have not had independent advice or if the Agreement has been drafted incorrectly.
2. Consent Orders
Consent Orders are another form of agreement between yourselves. Consent Orders can cover matters relating to division of property, care of children and ongoing spousal maintenance. The Orders must be written in a specific way. Once agreed upon, the Orders are filed with the Family Court of Australia. The Orders are considered by a Registrar in chambers (you do not need to attend Court). The Registrar will determine whether the Orders are drafted fairly towards each of you, based on the information provided to the Court, such as your income, liabilities, assets and care of the Children. Consent Orders can only be drafted when you and your spouse agree about how property should be divided and children cared for. Once approved by the Court, the Consent Orders become a legally binding court order and should either party fail to adhere to the Consent Orders the other person may lodge contravention/enforcement proceedings in Court.
