Property Settlement Before Divorce

Property Settlement Before Divorce

Property Settlement Before Divorce

When a relationship breaks down, separated couples must finalise the division of their property and debts. Property matters can be arranged any time after separation, even before a divorce is finalised. In some cases, a financial agreement or pre-nuptial agreement is made before marriage.

Find out more about property settlement, the process, how to divide property, and what assets to include.

Let’s take a closer look.

What Is Property Settlement?

At the end of a relationship or marriage, arrangements must be made to separate property and debts, and several different alternatives can be considered.

Property division should occur as soon as possible after divorce or separation, as strict time limits occur. If both parties can reach an agreement without going to court, it can save time and money.

Property settlement is the arrangement between two parties to divide their assets and liabilities after a divorce or separation. 

A person is responsible for providing financial support to their former partner if they can not pay their expenses. This is called spousal maintenance.

What Is Property?

Property covers a broad range of assets owned by either party or items of value accrued during or before the relationship. Debts or liabilities are also included. 

Some examples of property may include:

  • Real estate: including the family home, land or investment properties
  • Bank accounts
  • Money
  • Superannuation
  • Insurance policies
  • Investments
  • Shares or stocks
  • Vehicles
  • Jewellery and personal belongings
  • Businesses or companies
  • Family trusts
  • Furniture and household items
  • Other assets of value
  • Pets
  • Debts such as loans, mortgages, credit cards and personal debts

Steps For Property Settlement

Property settlement can be complicated and complex. When making plans to divide their property, parties must seek legal advice, to ensure they understand the process and their entitlements. Several steps must occur when commencing property settlement.

1. Identify And Value Property – Financial Disclosure

After a relationship breakdown, the first step when negotiating a property settlement is to identify and value all of the property to be divided and added to the asset pool, which occurs through financial disclosure. It is a legal requirement under the duty of disclosure, and failure to provide accurate information can lead to heavy fines or imprisonment. Each party must provide all the documentation about their income, assets and financial resources, including any assets held in their name, such as businesses or corporations.

2. Assess The Contributions

The second step is to assess the contributions made by each party including direct, indirect and non-financial contributions, and make adjustments based on future needs. Which may include child support, parental responsibilities and future earning capacity.

3. Make A Settlement Agreement

The third step for separated couples is to make a settlement agreement, ideally without the expense of going to court. Joint decisions regarding dividing property can be made via a mediation session, or family dispute resolution. During these discussions, it may be possible to create an informal agreement, financial arrangements or a consent order, which is legally binding.

Informal Agreement

An informal agreement can be made between separated couples without the help of a lawyer, but they are not enforceable by a court. Informal agreements can be a risky alternative, especially if one party changes their mind or disputes what was already agreed upon.

Financial Agreement

A financial agreement can be made at any time during or before a relationship, it may sometimes be called a pre-nuptial agreement. This document states how the property is divided, in the event of a divorce or separation, and parties should seek legal advice as some strict guidelines and rules apply.

Consent Orders

A consent order is a court-approved document that can be written without a court hearing. Applications are made at the Family Court, where they will determine whether the agreement is fair.

4. Go To Court

The fourth step, if parties can not reach an agreement about property division, is to apply to the Federal Circuit and Family Law Court for property orders. Court proceedings are an expensive and time-consuming alternative, and are generally only used as a last resort. The court will decide how the property is to be divided.

How Should Property Be Divided?

There is no formula about how to divide property after a divorce as individual circumstances and factors that impact future requirements can vary. The court will look at each matter independently, consider the evidence and make an order based on the facts.

Before commencing property settlement, parties must seek legal advice. 

Several factors will be considered to ensure the settlement is just and equitable, including the following factors:

  • The value of the joint assets and liabilities
  • Financial contributions made by each party
  • Indirect financial contributions such as inheritances or gifts
  • Non-financial contributions such as primary caregiver for children of the relationship
  • Future requirements such as earning capacity, financial resources, health, age, parental responsibilities
  • Ongoing financial support, such as spousal maintenance or child support

There is a wide range of orders that the Family Court will consider, and they must decide what is fair, equitable and appropriate in each circumstance. 

Several different property orders may be made depending on the situation, some examples include: selling the family home, transferring ownership to one person, splitting superannuation, a lump sum paid to an ex-partner, or the division of personal property.

Superannuation

For most people, superannuation is a large asset. Even though it may not be accessible for many years, it must be included as part of the property settlement.

Superannuation splitting laws ensure that it is considered as a different type of property in the asset pool, and depending on the type of superannuation, the way it is split can vary.

Parties must seek independent legal advice to understand their superannuation entitlements.

When Can The Court Make Financial Or Property Orders?

Under the Family Law Act 1975, the court can make property or financial orders for separated couples, including married couples or parties in a genuine de facto relationship.  

When their relationship ends and parties can not agree on how to divide their assets. they must try to make a genuine effort to resolve the issues before applying for orders. Mediation or family dispute resolution is a fast and effective way to reach a joint decision without commencing court proceedings.

If mediation is unsuccessful, court proceedings may be necessary to finalise property settlement.

Property Settlement Timing

A property settlement must be arranged as soon as possible after divorce, as time limits apply, and finalising court proceedings and consent orders can be time-consuming.

When married couples apply for property or maintenance orders, there is a limit of one year from the date of divorce, and for couples in a de facto relationship, the time limit is two years from the date of separation. 

Before a divorce is finalised parties can apply to the Family Court for consent orders to arrange a property settlement. 

Applications outside these time frames will require permission from the court before an application for property orders can be granted.

Summary

When their relationship ends and parties can not agree on how to divide their assets, they must try to make a genuine effort to resolve the issues before applying for orders. Property division should occur as soon as possible after divorce or separation, as strict time limits occur. If both parties can reach an agreement without going to court, it can save time and money.

Property covers a broad range of assets owned by either party or items of value accrued during or before the relationship, such as the family home, vehicles, bank accounts, cash, jewellery, and items of value.

Several steps must occur when commencing property settlement, such as financial disclosure, assessing the contributions, reaching an agreement, making a settlement arrangement or going to court. 

It is crucial to try to arrange a property settlement as soon as possible after divorce, as time limits apply, When married couples apply for property or maintenance orders, there is a limit of one year from the date of divorce, and couples in a de facto relationship, the time limit is two years from the date of separation.

There is no formula about how to divide property after a divorce, as individual circumstances and factors that impact future needs can vary. A court will consider contributions made by each party, including financial resources and any ongoing financial support requirements.

Before commencing property settlement, parties must seek legal advice to ensure the settlement is just and equitable. 

FAQs

What Is The Average Split In A Divorce Settlement In Australia?

In most property settlement cases in Australia, assets are distributed equitably, which does not always mean equally. Depending on the amount of individual assets each party brings to the relationship and future requirements for an ex-partner, the division will vary, but always aims to be a fair distribution.

The most common split is 60/40, with settlements in favour of the ex-wife, often because they may have a lower earning capacity as they are generally the primary caregivers of children in the relationship.

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