Property Settlements Explained: Protecting Your Assets During Divorce
Divorce is a challenging process, both emotionally and financially. One of the most critical aspects of a divorce is the division of property. People often think about just the really big things when splitting assets for example the house and car,– but there is more to it than that. It’s important that you speak to your lawyer early on in the process to protect your interests when going through property settlements.
Understanding Property Settlements
Property settlement is the division of assets and debts between the parties. It includes everything you own and owe, individually, together with your spouse or with any other person. This encompasses real estate, businesses, vehicles, investments, furniture, and even superannuation. Having an understanding of what constitutes property is vital as it ensures nothing is overlooked during settlement negotiations.
The Concept of ‘Fair’
The Family Law Act 1975 governs property settlements in Australia. It does not automatically split property 50-50 but aims for a ‘just and equitable’ division. This means the division is not always equal but should be fair, considering various factors such as financial contributions, non-financial contributions, future needs, and the practical effect of the proposed settlement. The notion of fairness extends beyond mere numbers, aiming to account for the unique circumstances of each case.
The fact that there is some subjective analysis involved in the decision is why it’s important to retain lawyers that can help prepare and articulate your case, to help achieve an ideal outcome for your needs and situation.
Steps in Property Settlement
Before the Court even makes any property settlement Orders, the Court first needs to be satisfied that it is ‘just and equitable’ or ‘fair’ to even adjust property interests. This is the qualifying step before delving into the rest of the process.
Step 1 - Identify and Value the Property Pool
The first step in a property settlement is to identify all assets and debts and assign a value to them. This process requires complete transparent financial disclosure from both parties. It’s crucial to be honest and disclose all assets, as failure to do so can lead to significant penalties including any final property Orders being set aside by the Court at a later date. Attributing values to various assets may involve professional valuations for properties, vehicles, businesses, superannuation entitlements and other significant assets to ensure accuracy.
Step 2 - Assess Contributions
Next it is important to consider the financial and non-financial contributions from both parties. Financial contributions include earnings, inheritances, windfalls, redundancies and gifts. Non-financial contributions are as equally important and encompass homemaking, parenting duties, and contributions to the maintenance and improvement of property. These contributions are weighed to reflect the overall effort and input from both parties during the relationship.
Step 3 - Consider Future Needs
At the next step the Court will weigh up and consider each party’s future needs including the age, health, financial resources, care of dependent children, and earning capacity. This step acknowledges that one spouse may require more resources post-divorce due to lower earning capacity or the responsibility of caring for children of the relationship. The aim is to ensure that both parties can maintain a reasonable and equitable standard of living after the separation.
Step 4 - Practical Effect and Just and Equitable
The final consideration is if any proposed settlement is ‘just and equitable’. It’s not a strict mathematical calculation but a holistic assessment that takes into account all matters. The practical effect considers the feasibility and long-term impact of the settlement on both parties, ensuring neither party is unfairly disadvantaged.
Protecting Your Assets
To protect your assets during a divorce, the steps you should take include:
1) Get Legal Advice
Engage a lawyer that specialises in family law – like Espino Law - to guide you through the process. Legal advice is crucial as it helps you understand your rights and obligations, and ensures that all necessary steps are followed correctly. Getting advice from a lawyer who predominantly practices in family law can save you thousands in the long term as they have a thorough understanding of the process, the law and any changes or developments that may impact you.
2) Complete All Necessary Documentation
Draw up and keep detailed records of all your assets, debts, and financial transactions. Documentation is key in proving ownership, value of assets and contributions. This will help in creating a transparent picture of your financial situation and the history of the relationship.
3) Apply For Interim Orders If Necessary
If you fear your partner might dispose of assets that they have access to recklessly – for example giving the car away or liquidating assets to spend the money frivolously, you can apply for an interim order to protect your property. Interim orders can freeze assets or place restrictions on their disposal until the final settlement is reached, preventing any malicious or hasty actions that could diminish the asset pool. It is always better to ensure that the property pool is preserved pending the final resolution of the case where possible.
4) Understand The Legal Framework And Principles
Understanding the legal framework and principles behind property settlements can demystify the process and relieve some anxieties around it. Australian law emphasises a systematic approach, ensuring that each step towards a settlement is grounded in fairness and equity. This framework provides a structured method for resolving disputes and helps parties reach an agreement without unnecessary conflict.
5) Learn The Role And Value Of Mediation
Mediation is a crucial step in property settlements. It involves a neutral third party who helps both parties negotiate and reach a mutually acceptable agreement. Mediation is certainly less adversarial than court proceedings and can save significant time, stress and money. The mediation process also allows for more creative and flexible solutions tailored to the specific needs of the parties involved rather than handing the decision making to a judge or another judicial officer who has limited information about you or your family.
Common Pitfalls to Avoid
During the process of property settlement, certain pitfalls can complicate the proceedings. Being aware of these can help you navigate the process more smoothly, and your lawyers will certainly help you avoid them. This is why it is so important to engage with lawyers early on.
1) Incomplete Disclosure
Failing to disclose all assets and liabilities can lead to penalties and complicate the settlement process. Complete transparency is essential for a fair division of property.
2) Emotional Decision-Making
Divorce or separation is inherently emotional, but making decisions based on anger or hurt can lead to unfavourable outcomes. It's important to approach settlements rationally and seek professional guidance to make informed decisions.
3) Ignoring Future Implications
Focusing solely on immediate outcomes can be detrimental. Consider the long-term implications of the settlement, including future financial needs and the stability of the arrangement.
Navigating property settlements during a divorce or separation can be complex. Understanding your rights and obligations under Australian law can help ensure a fair outcome, but it is important to understand that there is subjectivity built into the division of property, and whenever there is subjectivity in the application of the law, it is essential to have experienced, specialised help in your corner from the outset.
If you find yourself in a situation where a separation means you need to determine the settlement of assets and property, contact Espino Law immediately. We can help.
