In our last post, we looked at how the Family Law defines property. Today, we want to share with you the three steps of property distribution.
When it comes to property settlements, it’s not just about what you own and owe; it’s about what you’ve contributed, the roles you had during your relationship, and who has made what contributions. All these factors are taken into account when dividing up Property. What each partner is likely to need in the future is also taken into account.
It’s important to note that you will not receive less in a property distribution simply because you brought in fewer dollars during the relationship or if you were a homemaker.
The Three Steps of Property Distribution.
Lawyers are often criticised for complicating the law and making it almost impossible to understand. We are going to do the opposite – even at the risk of being accused of being simplistic – and explain the principles of property or financial distribution in a very straightforward way.
You only have to answer three questions to decide who is entitled to what property:
- What are the assets (things you own) and liabilities (things you owe), and what is their value?
- Who made what contribution to those assets and liabilities? Or, more simply, who brought what money or property into the relationship?
- Are there any factors that would support an adjustment of the allocation of property in favour of one person over the other?
Although some lawyers may make the process seem far more complicated, this is how it works.
In Step 1, you determine the net pool available to be split, which is expressed as a dollar figure.
In Step 2, you work out what each party brought to the relationship. This can include
- Financial contributions (both direct and indirect.) Things such as income, any property that was owned at the start of the relationship (or received during the relationship, or after separation), gifts, inheritance, or lottery winnings.
- Non financial contributions. These are contributions that are not measured directly in dollar terms for example if one of you worked nights and weekends on an investment property to increase its value, or one supported the other by attending business functions and provided general assistance to enable them to carry on a business.
- Contributions to the welfare of the family. This includes looking after the children and domestic duties generally for example, washing and ironing, cleaning and shopping. In Family Law, welfare contributions are not treated as inferior to financial contributions, which means if you have stayed home to look after the kids while your spouse works, you have still been contributing to the total property pool.
At the end of this step, you express each party’s contributions in percentage terms, such as 60% to 40% or 50% to 50%
In Step 3, the Family Law will assess any further adjustments. These are called the section 75(2) factors as they are laid out in s75(2) of the Family Law Act. They take into account each partner’s situation and include the following.
- the age and health of each partner
- income earning capacity – i.e. how much does or could each partner earn as income
- any responsibilities that you or your ex-partner may have for children of the relationship (after the separation)
- financial resources
- what might be a reasonable standard of living in the circumstances after separation
- how long you have lived together, and
- whether child support is being paid.
It also includes “any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account.”
In simple language, this last factor means that the law permits a judge to take into account virtually anything. This is why it’s a good idea to avoid court, and use solution focused mediation, as both parties are in control of the outcome (not to mention avoiding the enormous court costs!)