Once a relationship has come to an end it is necessary to divide the assets and liabilities with your ex-partner. If you do not formally divide and document your property settlement then your ex-partner may be able to make a claim for your assets in the future.
How does the court divide the property?
The Family Law Act is the framework used by the Courts to decide what is a fair division of property between the parties. This framework is summarised below and is called the "three step process":
Identify and value all of the assets and liabilities of the relationship. This is called the “Property Pool” and will include all current property whether it was obtained before, during or after the relationship.
A number of common items not considered by separated couples are inheritances, redundancy payouts, superannuation, assets and goodwill in a business, life insurances and compensation damages.
Assessing the contributions of the parties. There are many contributions that add value and assist in building a property pool during a relationship and they are not always financial inputs. The Family Law Act determine various contributions as assisting to build a property pool such as earnings, inheritances, initial savings or properties owned before the relationship started, improvements to the property, gifts, and contributions as a homemaker and parent.
These contributions often hold different weights and are assessed in accordance with case law.
Assess the needs and resources factors that may impact on the parties in the future. These matters are considered to ensure that the division of assets is fair. The law looks at the parties’ age, health, income, whether they are the primary carer of children and the length of the relationship.
We have agreed on a property division, what is next?
Once you have reached an agreement it is integral that you have it documented in the form of Consent Orders (which are sealed by the Court) or as a Binding Financial Agreement. To formally document an agreement the relevant law must be stated and applied correctly. A formal document prevents parties from overturning the agreement in the future to claim more assets. A formally documented agreement can only be overturned in specific circumstances such as fraud for example.
Another advantage of having your agreement formally documented is that any transfer of property under the agreement will be exempt from Stamp Duty. The Stamp Duty on a transfer of a $500,000 house is approximately $10,000. This is a saving that cannot be ignored during a time when splitting finances causes serious cash-flow problems.
Call us today to arrange a free consultation so that we can assist you with your separation agreement.