Family Law Property Settlement FAQ
1. What is a ‘property settlement’?
When people separate (whether from a marriage or a de facto relationship), they usually need to sort out how to divide their assets and debts between them. The term ‘property settlement’ therefore refers to the process of negotiating which party is going to keep which assets and liabilities, making the agreement legally binding, and then taking the steps to implement the agreement.
A property settlement is a completely separate process to sorting out any other aspects of your separation, such as obtaining a divorce, parenting arrangements for children and making arrangements for child support.
2. Do my former partner/spouse and I need to do a property settlement?
You and your former partner/spouse will remain financially tied to each other until you have completed a formal property settlement to cut those ties. While you and your former partner could simply reach an agreement about your finances, divide assets up and go your separate ways, unless that agreement is made legally binding, either party could try to make an application to the Court at a later date seeking a formal property settlement.
Completing a family law property settlement will give you certainty about who has retained what assets and ensure that you have financial freedom and separation from your former partner or spouse.
3. When can we start negotiating a property settlement?
There is no requirement to wait any length of time after separation before commencing a property settlement and when you choose to start negotiating will depend upon a range of factors, including the nature of your post-separation relationship with your former partner or spouse.
De facto couples have 2 years from the date that they separated to complete a property settlement and apply to the Court either for consent orders to make the agreement binding, or to issue Court proceedings.
Married couples can complete a property settlement and apply for orders any time prior to divorcing. Once a married couple have obtained a divorce, a 12 month time limit begins for the property settlement to be completed within.
If you miss either of these timeframes, the parties will need to seek leave from the Court to apply out-of-time, and explain why they were delayed in applying for a property settlement.
4. When we reach an agreement, how do we make it binding?
There are two ways that you and your former partner/spouse can make a property settlement binding:
A. Consent Orders
Once an agreement is reached, it can be made binding through obtaining Court orders by agreement or consent. You and your former partner/spouse will need to complete both an Application for Consent Orders and prepare a Minute of Consent Orders which details your agreement, and submit the documents to the Court. The Application for Consent Orders form is available online, but must be completed in detail and accurately, with no asset or liability of the parties being excluded. The Minute of Consent Orders is the written orders which clearly state what the agreement is and how it will be achieved and complied with by the parties. There is no template or form for the Minute.
While it is not a requirement for the parties to have legal advice to obtain consent orders, it is recommended that you obtain legal advice to ensure that the agreement being entered into is fair and equitable. Further, the Minute is a highly technical document and heavily individualised to each couple’s separation. Therefore, it can be very difficult for parties to draft this document themselves and we recommended that a trained family lawyer assist you in this regard.
Once the Application and Minute are submitted to the Court, the Court will review the agreement and make a determination about whether they consider it to be a fair and equitable outcome, and whether the settlement documents have been completed properly.
If so, Final Orders will be made by the Court. If not, the Court will reject the application and require the parties to amend the documents and/or the terms of the agreement.
B. Binding Financial Agreement (BFA)
A BFA is a document, similar to a private contract, between the parties in a family law matter. The intention of a BFA is to remove the Court’s jurisdiction in relation to your property settlement, so that the parties can enter into any agreement they wish, without the requirement of a Court considering the outcome to be just and equitable.
BFAs are highly technical documents which must comply with extensive legislative requirements, which necessitates that they be drafted by a family lawyer, and both parties must receive independent legal advice about the BFA, including the advantages and disadvantages of entering into the BFA. Each party must be provided with a signed statement from their lawyer as to having been provided with the required advice.
Click here to read more about BFAs in family law.
5. I need to start negotiating with my former spouse, what is the process?
Family lawyers and the Court follow the same four-step process to help to negotiate or determine a just and equitable property settlement: `
Identify and value the assets, liabilities and resources of the parties;
Consider the contributions of the parties made throughout the relationship;
Consider the future needs of each party; and
Determine whether the proposed settlement is just and equitable.
You may also like to start the negotiations by identifying the assets and liabilities and obtaining evidence of the value of same to enter into discussions with your former spouse.
6. What is included in our property pool for family law property settlement purposes?
The property pool of the parties is comprised of everything that you each own as an asset, or debts owed, whether in sole names or joint names, or whether held through businesses or trusts or by other people on your behalf. It is a common misconception that an asset owned in your own name, or assets which were purchased before the marriage/relationship or after separation, or debts accumulated prior to the marriage/relationship or after separation will be excluded from the pool. However, this is not the case.
Assets can include real estate, vehicles, bank accounts, shareholdings and businesses. This includes assets which you may only hold a share in, for example, a 50% interest in a business which is owned by another person, not your former partner/spouse.
Debts can include mortgages, business/personal loans, credit cards, vehicle finances and HECS debts.
The superannuation entitlements of each of the parties is also included in the property pool.
While there will be negotiations about which party is to retain which assets and debts contained in the property pool, it is pivotal that all are identified and set out in a pool as the starting position. The exchange of disclosure material assists with this process (detailed below).
The value of the assets and liabilities in the pool are at the date of negotiations, or the Court making Final Orders. Not at the date of separation or when they were purchased. For this reason, it is recommended that family law property settlements occur within a reasonable period of time following separation. Values can obviously change significantly with the passage of time. Click here to read more about the date of assets being valued in property settlements.
7. My former partner/spouse owns a property in their sole name, can they sell it without telling me?
If you are concerned that your former partner/spouse may sell a real property held in their sole name without your knowledge or consent, before you can complete a property settlement, you may want to consider whether you have a basis or interest in the property to enable the lodging of a caveat over the title to the property.
There are strict requirements about the basis on which a party may or may not be able to lodge a caveat over a real property. Caveats are a matter in which you will require specific legal advice and legal representation. Lodging a caveat over the property means that you will need to be notified if your former partner/spouse intends to sell the property, and your caveat will need to be removed in order for the settlement of the sale to proceed, and similar if a refinance or new borrowings against the property are sought. Click here to read more about caveats in family law matters.
Caveats are not always necessary, particularly where you and your former partner/spouse remain amicable and they, or a lawyer acting on their behalf, keeps you informed of the sale process for example.
Regardless of whether or not a caveat is lodged, we recommend that if real property or other significant assets are sold prior to a family law property settlement being reached, that the sale proceeds are held in a solicitor’s trust account for the parties, so neither can expend the funds without the other’s consent.
8. What is disclosure and do we have to do it?
Under the family law legislation, parties are obligated to make full and frank disclosure about your financial circumstances and issues relevant to the case, to the other party. The duty is ongoing, meaning that if your negotiations take some time, you may be required multiple times to produce updated financial documents.
Common disclosure documents to be exchanged include tax returns, payslips, business financial statements and tax returns, superannuation statements, bank account statements and vehicle valuations.
9. What are contributions?
Family lawyers and the Court look at both financial and non-financial contributions of the parties, both prior to and during the marriage/relationship, and post-separation.
For the purposes of the family law system, a marriage or relationship is generally considered to have commenced when the parties began cohabitating together, not necessarily at the date that the relationship commenced or when the parties married.
Initial contributions refer to any assets owned, or debts owed by the parties, prior to commencing cohabitation. The longer the relationship, generally the less weight that the initial contributions of the parties will hold in relation to the property settlement.
The Court then also considers both contributions made during the course of the marriage/relationship once cohabitation started, and in the time post-separation until a settlement is reached or ordered.
Financial contributions can be money contributed to the acquisition, maintenance or improvement of assets at the beginning, throughout and after the relationship. For example, whether one or both parties worked and earned an income and gifts or inheritances received by a party.
Non-financial contributions often refer to the conduct or efforts of a party towards the acquisition, conservation or improvement of the property pool, such as personally performing renovations to the family home, or project managing a home build.
Homemaker contributions can recognise the efforts of domestic duties performed during the marriage/relationship, such as cleaning, cooking, laundry, groceries, gardening and home maintenance and repairs.
Parenting contributions generally recognise the contribution of one or both of the parties to parenting duties of children. This is particularly relevant where one party may be a stay-at-home parent.
Adjustments to the property pool in favour of the parties will therefore occur based on the contributions of each of them to the acquisition, maintenance or improvement of the property pool.
10. What are “future needs”?
Family lawyers and the Court will also assess a range of factors categorised as the future needs of both of the parties. The family law legislation sets out a list of categories to be considered, but most commonly there is an assessment of the following:
The income earning capacity of the parties. This means the realistic likely income a party could earn through paid employment, and is often relevant in circumstances where one person may be electing to work less than they could.
The income earning disparity between the parties. This assesses the difference between the current, or realistic likely income of the parties in their respective employment.
The health of the parties. This is particularly relevant where one party’s ill health impacts their ability to work and earn an income, or even effects their life expectancy.
The age of the parties. This is particularly relevant where one or both parties are nearing retirement age.
Care of children. This is likely to impact a party’s capacity for full time employment, particularly where the children are young.
11. I need some financial support in the meantime until we reach a settlement, what can I do?
The process of negotiating and ideally reaching an agreement for a property settlement, making it binding and then implementing the agreement can often take some time.
Therefore, sometimes a situation arises where one party has greater access to funds or financial resources than the other, who may be struggling financially to meet their living expenses, outgoings and legal fees to continue the negotiations. In these circumstances, this party may seek a partial property settlement, in advance of the final settlement being reached.
A partial property settlement usually involves a distribution of assets (usually funds) between the parties and is often in the form of a lump sum payment from bank accounts or from proceeds of sale of a real property or other asset. The purpose of a partial property settlement is usually to counteract any interim inequity in financial positions of the parties.
Click here to read our article all about how partial property settlements work in family law matters.
In some cases, a party who cannot meet their necessary living expenses from their income may be able to seek a spousal maintenance payment from their former spouse or partner. This is not usually applicable in all family law matters and the party’s need must be balanced with the other party’s capacity, or excess funds available, in order to be able to meet the need or shortfall. Spousal maintenance can be a complex area and legal advice specific to your personal circumstances will be required.
12. One of us received an inheritance, is it relevant to our property settlement?
Many Australians may have received, or are set to receive, some type of inheritance in their lifetime.
Most people may assume (or hope) that inheritances are excluded from a family law property settlement, and that they are “quarantined”. Therefore, some may be surprised to read, that inheritances are not excluded or automatically quarantined in a family law context.
Any inheritance that one party to a family law matter has received is an important consideration in their family law property settlement. Even more so if the inheritance is or is likely to be a significant one.
Click here to read our article all about how inheritances are treated in family law property settlement matters.
13. One of us has a debt, does it need to be included in our property settlement?
Usually debts accrued during the relationship, which both parties have benefited from will be considered a “relationship debt” even if the debt is only in one person’s name.
Debts are to be paid (or taken into account) before there is a distribution of assets between the parties by way of a property settlement.
Even if one or both of the parties do not agree to debts being paid, the Court can order the debts be paid prior to any distribution of funds to the parties.
Even if one party is not aware of a debt, it can be included as a liability in the asset pool for distribution and/or payment prior to any distribution of assets between the parties.
During relationships there can be good and bad economic times. Both parties must generally share in the benefits and negatives of economic circumstances during their relationship.
Click here to read more about debts in family law matters, including a factual case scenario.
14. One of us has a business, how do we value it?
The value of all assets in family law matters can be whatever value is agreed to by the parties. However, it is common that separating couples will not be able to always necessarily reach an agreement about the value of certain assets, particularly something as difficult to value as a business.
To seek to ensure accuracy, independence and fairness when obtaining a value of a business interest that forms part of the family law property pool, it is quite common for the parties to jointly engage a qualified valuer to prepare a business valuation report.
While it can be expensive to engage a qualified valuer, this approach will usually bring certainty to the value of the business and assist the parties in the advancement of negotiations and reaching a final settlement.
Click here to read our article all about obtaining business valuations in family law matters.
15. Does my superannuation have to be included in the settlement?
The superannuation splitting legislation treats superannuation as a different type of property in a family law context. It allows separating couples to value their superannuation (if required) and split superannuation between them, although this is not mandatory. While a superannuation split between the parties is not compulsory, the value of the parties’ superannuation entitlements must be considered in the property pool available for division.
Generally, the Court adopts the methodology that where there is a long marriage/relationship, the superannuation interests of the parties will generally be equalised.
The exception in relation to the equalisation of superannuation interests may be where one party accumulated a significant amount of their superannuation prior to cohabitation. In this instance, a party may be able to argue that only the superannuation entitlements that they accrued during the relationship should be available to be split between the parties.
Splitting of superannuation entitlements does not convert it into a cash asset – it is still subject to superannuation legislation and eligibility requirements and it will therefore generally roll over into the other party’s nominated superannuation fund.
16. We can’t reach an agreement, what do we do now?
If you and your former partner/spouse cannot reach an agreement as to a property settlement either by direct negotiations or with the assistance of lawyers in negotiating, the next step is generally to engage in a mediation process.
A qualified mediator can be engaged by the parties to conduct a mediation session for negotiations to occur in a more formal setting. It is recommended that the mediation be lawyer-assisted to ensure that you have a family lawyer advocating on your behalf and advising you as to the offers made during the mediation and the likely range of outcomes.
Generally family law mediations are conducted by the shuttle-method, meaning that you will not usually be in the same room as your former partner/spouse, rather the mediator and your lawyer will move between rooms to facilitate the negotiations.
Click here and here to read our articles about the benefits of mediation in family law matters to facilitate reaching a property settlement.
17. What is the process of issuing Court proceedings?
If you and your former partner/spouse have engaged in negotiations and/or a mediation and have been unable to reach an agreement, then you may be required to issue proceedings in the Federal Circuit and Family Court of Australia in order to obtain final property orders for a property settlement.
There are a range of steps that must be undertaken before you can issue a Court application, which includes exchanging financial disclosure and participating in dispute resolution with the other party. These are called the ‘pre-action procedures’ which evidence to the Court you have taken genuine steps to try and resolve the dispute before resorting to Court proceedings.
If your matter is urgent, or your former partner/spouse has refused to respond to your negotiation attempts, you will likely be exempt from meeting at least some of the pre-action requirements.
While it is possible to be self-represented in family law Court proceedings, it is strongly recommended that you engage a family lawyer to act on your behalf to prepare the requisite Court documents, to provide you with advice as to the process, and to appear on your behalf at Court events.
Even though Court proceedings may have been issued, the parties are able to continue to negotiate and reach a settlement and agree to final consent orders at any stage during the proceedings. For this reason, it is unlikely that your matter will run all the way to a final hearing where the Judge would make the final decision on the property settlement.
The Family Law team at Harwood Andrews has expertise in resolving family law property settlements for clients. If you have any questions about how any of the above applies to your matter, or to make a start on your property settlement negotiations, click here to book an appointment with one of our family lawyers.
Tara Paatsch
Principal Lawyer
M 0412 660 842 | T 03 5225 5254
E tpaatsch@ha.legal
Natasha Vassallo
Lawyer
T 03 5225 5237
E nvassallo@ha.legal
