Dividing up your property/finances after separation can be confronting.

Family law regarding property settlement does not follow a set formula but considers, instead, a wide range of issues.

Ian Shann, Perth family mediator, shares the 4 key steps in property settlement when couples separate.

When Couples Separate: 4 Key Steps in Property Settlement

Step 1- Identify Assets & Liabilities

The first step is always to identify what should be included in the asset pool.

This means identifying what both people own and owe. Everything is included—no matter in whose name it is held (or whether it’s held through a corporate entity or through a trust or something in which a party has a legal interest).

An asset and liability schedule should be prepared which may include:

• the family home and any other real estate
• superannuation
• motor vehicles, furniture, jewellery and personal items
• money in the bank, shares and investments
• interests in any business
• loans, mortgages and debts

And don’t forget crypto currency.

A value should be placed on all of the components included in the asset and liability schedule.

A “two-pool” approach is sometimes used – whereby non-superannuation and superannuation assets are assessed separately. This can be appropriate where one party has a greater need for non-superannuation assets (i.e. ‘cashable” assets) rather than retirement benefits which may be a long way off.

Step 2 – Look At Contributions

The next step -after ascertaining what is in the net pool – is to look at the contributions each person has made to the relationship. This includes both financial and non-financial contributions.

Financial contributions would include:

• each party’s incomes
• inheritances or gifts
• investments
• payments for the house or bills.

Non-financial contributions might include:

• caring for children
• household work like cleaning, cooking, and maintaining the home
• support for a partner while they worked or studied
• care of children from a previous relationship.

Non-financial contributions are generally regarded as equal to financial contributions. So, just because one partner brought in all of the income and/or earned a very large income throughout, does not mean that financial contribution will be regarded as more significant than the non-financial. Raising children or staying home to care for the household has long-term value and is usually regarded as offsetting the financial one – it’s part of the “relationship contract”.

However, if one party has made a significant contribution outside the normal relationship arrangements, for instance by receiving a substantial inheritance, this may well justify an “adjustment” of the overall distribution in that person’s favour. How much adjustment will depend on a number of factors including the value of the contribution, when it was received, what proportion it bears to the overall net pool and how large the pool is. It is a matter of context. But a substantial and unexpected bonus at work or share entitlement, for instance, is unlikely to have any impact on contributions.

Step 3 – Determine The Parties’ “Future Needs”

Future needs play a big part in how property is split. They are set out in the Family Law Act (or, in the case of de facto couples, the Family Court Act [WA]) and include such factors as:

• the length of the relationship – barring other factors, the longer a relationship the greater there will be an assumption of equality
• age and health
• health conditions or disabilities
• earning capacity or job opportunities
• whether child support is being paid
• care arrangements for children in the future
• financial resources – like a defined entitlement to receive shares in the future as part of an employment arrangement

Every relationship is different. But, after assessing all of the relevant factors, it will be necessary to determine whether any further adjustment is justified on account of the future needs factors.

Step 4 – Be Fair & Reasonable

So, having determined the asset pool, worked out whether one or other party should receive an adjustment (and how much adjustment) for their special contributions and/or future needs, there will be a distribution to each party of the pool that can be expressed as a percentage, e.g. 50:50 or 60:40 of the overall pool.

Or, parties might use a percentage distribution as the starting point and determine how the asset pool will be divided accordingly.

Once the proposed distribution is “agreed” parties should stand back and ask themselves the question “is this fair and equitable in all the circumstances”.  Of course, each party will have their own subjective judgment of what is fair and reasonable – their assessment is neither “right” nor “wrong”; it’s simply their perception of what is fair.

And there will almost always be a range within which a “reasonable and equitable” distribution will be “fair” and regarded as such by a Family Court. 

That’s exactly what lawyers will argue about; and that argument can be a very costly one – in many cases the costs of the argument outweigh whatever additional distribution is achieved.

Have you and your partner separated and need to sort out your property matters?

If you’re ready to get started on your property settlement, family mediation is the quickest, most amicable, and affordable option to do so.

Get in touch with family mediator Ian Shann today to book your family mediation to settle your property matters.