Property Settlement after Separation – What to Know
It important to highlight that there are three distinct processes that sit under the umbrella of a de facto separation and divorce:
- The Property (Financial) Settlement Process
- The Parenting Arrangements Process (inclusive of child support); and
- For those who are married, the Divorce Application Process
On this page we focus on the property settlement process.
For information specifically about parenting arrangements go here.
For information and insights into applying for a divorce, go here.
Below we answer these common questions and highlight these essential considerations:
- When can we start the property settlement process?
- How do you divide property in a divorce (or de facto separation)?
- What’s involved in a separation/ divorce settlement?
- How long does the property settlement process take? &
- Why formalising the terms of any agreement is so important.
This information is specific to anyone who has been in a de facto relationship or marriage in Australia.
For information specific to divorce if you were married overseas, visit this page.
Property Settlement After Separation or Property Settlement After Divorce?
Unlike the 12 month timeframe required to apply for a divorce, if you are married then a property settlement can commence (and be finalised) at any point after separation.
While there are time limits on when a property settlement must be completed that is specific to whether you have been in a de facto relationship or a marriage, it is important that it is addressed in the shorter term.
There are numerous ways in which delaying the commencement of the property settlement, whether until finalising a divorce or just allowing time to pass, can create significant negative consequences.
Generally speaking it is ideal to get this process under way and finalised sooner rather than later. Delaying a settlement will not only cost you time, but may throw additional curveballs into negotiations. For example, if one spouse has received an inheritance during the separation period. Or, if you have a business, it can also create additional consequences affecting the business and any third parties. That being said, below we highlight some important considerations around approaching these important discussions, inclusive of timing.
Who Gets What In A Financial Separation/ Divorce Settlement?
Figuring out how you divide property in a divorce or de facto separation is rarely as black and white as splitting everything down the middle. Being informed about the process that is a requirement by law, and the objectives of a property settlement can help manage expectations from the start and minimise disputes and uncertainties.
How Do You Divide Property in Divorce / De Facto Separation?
The Property Settlement Process
In family law, there are five distinct steps involved in the property settlement process.
- Whether it is ‘just and equitable’ to make a property settlement
- Identification of the property pool
- Assessing contributions
- Making future needs adjustments; &
- Finalisation of the property settlement practically.
Step 1: Is It ‘Just And Equitable’ To Make A Property Settlement Order?
In most cases where people have either been married or in a de-facto relationship and have separated, it would be considered fair in Family Law to divide the property pool, so that each receives a property settlement.
But in some cases, particularly short relationships where people have kept their assets separate, a Court may decide it is not appropriate to make an Order.
Step 2 – Identifying The Property Pool
The first stage of any property settlement is identifying the property pool to be divided. Property includes houses, land, cars, bank accounts, stocks and shares, or any other type of asset. It also includes superannuation. The property pool does not only take into account your assets, but also your liabilities.
To accurately identify the current value of assets, you may be required to seek valuations if you don’t agree on the value.
Generally speaking, regardless of whether you have property in your name or your former partner or spouse’s name, or in a company or trust, all assets are to be reviewed and considered as part of the collective ‘property pool’.
Related: Are Trusts Protected From Divorce & De Facto Property Settlement Claims?
Step 3 – Assessing Contributions
This step is about arriving at a division expressed as a percentage, based on an assessment of the contributions of both parties to the relationship.
There is no presumption of a 50-50 split and each case is looked at on its merits.
In family law, people in a relationship may have made one or more of the following contributions:
- Financial contributions;
- Non-financial contributions; or
- Contributions as a parent or homemaker.
Including the assessment of non-financial contributions recognises that although one person may not have brought in a monetary income, they most likely contributed to the relationship in other ways.
Examples of these non-financial contributions include:
- Performing unpaid work in the family business
- Being the primary carer of children
- Renovating a property
- Taking responsibility for running the family home
This step also takes into account the financial contributions made by each person’s family, including gifts and inheritances.
Related: Are Gifts & Inheritances Included in a Property Settlement?
Step 4 – Making Future-Needs Adjustments
Adjustments for future-needs are particularly relevant when children are involved or there is a significant difference in income and earning capacity between you and your former spouse or partner.
For example, someone who has been a stay-at-home parent for the past twenty years may not be able to return to the workforce straight away at the same level they were at before children.
Additionally, the circumstances of the relationship and the opportunity cost of any career sacrifices made in taking on the care of children also needs to be considered. For this reason, the parent who took on primary care duties may need a larger settlement sum because they may have a lower income earning capacity.
Someone leaving a relationship who has made non-financial contributions may require time to find employment or undertake training to be able to obtain employment. An adjustment may therefore be required, taking into account the consideration of the future-needs of that person, and the role they will hold into the future, as well as the reasonable standard of living for both former spouses.
The type of questions that we, as family lawyers, are looking to answer to determine the future needs of both spouses, include:
- What are the parenting arrangements for your children moving forward?
- Is future education or training required to increase one spouse’s earning capacity?
- Does one partner have the earning and borrowing capacity to buy another property and realistically support themselves?
- If one member of the former couple is living with a new partner, does this change financial circumstances?
In addition to the property settlement, there are some limited circumstances where applying for spousal or de facto maintenance on a final basis may also be appropriate if only one spouse is working. Spousal maintenance is usually short term and helps support an individual until they can generate their own income.
Gender stereotypes about perceived economic advantage or disadvantage simply don’t hold when it comes to dividing the assets of a relationship. Anecdotally, you may have heard things about the wife always keeping X, Y, Z and the husband keeping A, B, C, and you might think to yourself, ‘If that happened to them, then it will surely happen to me.’
Fortunately, or unfortunately, depending on the outcome, that is not the way property is divided in family law. Every situation is different, and your negotiations will be different depending on the unique needs of you and your former spouse or partner.
Step 5 – Dividing Property And Finalising The Terms Of The Agreement
This stage involves the practical division of property (including the sale of property if required), and the finalisation of the agreement by Consent Orders or through a Binding Financial Agreement (often referred to simply as a BFA).
Unfortunately, there are a number of issues that can and do arise during this process, so it is wise to seek legal advice before agreeing to any arrangements.
Importantly, because your separation is as unique as your family, your property settlement process or outcome will not be the same as a friend who has seemingly similar circumstances.
An experienced family lawyer will weigh up your needs and advise you of the most appropriate terms, as well as formalise your agreement with Consent Orders or a Binding Financial Agreement.
How Long Does A Financial Separation or Divorce Settlement Take?
Unfortunately, this is kind of like asking, ‘How long is a piece of string?’ There are a whole host of variables that can impact the timeline of your property settlement.
Even though parenting and property negotiations can commence as soon as you have separated, that doesn’t necessarily mean the process will be smooth-running or fast.
You may need to get valuations on a family business, or unforeseen circumstances may mean you might need to commence Court proceedings.
What May Prolong or Expedite a Financial Settlement
Some factors that can prolong or expedite the financial settlement include:
- The nature of the property pool (simple or more complex);
- If there is a Mediation, how that process unfolds and how willing each party is to participate and make concessions to find a solution;
- If a Family Report is required and, again, how that process unfolds and how willing each party is to participate
- If you need a Court to make a decision;
- Third-party influences or delays;
- Agreeing to terms that does not fall within the range of likely outcomes (i.e. in keeping with the five steps outlined above);
- The condition of the relationship (whether it is amicable or not, and if it remains that way).
For one person, the relationship breakdown may take longer to process. If one person has been thinking about separating for some time, they are sometimes more ready to negotiate early, whereas the other person may not be, as they are still coming to terms with the loss of the relationship.
Timing the conversations and the steps involved in the property settlement process must be considered carefully.
While as family lawyers we know the law best, you know your former partner or spouse better than anyone. Providing your family lawyer with insights about likely friction points can help avoid triggering an aggravated response or derail the process.
There is one final important element that is often overlooked.
Whether you have sought legal assistance from the outset or have negotiated the terms independently with your former partner or spouse, it is always advisable to have a family lawyer involved in formalising any property agreement. Drafting agreements without expert advice opens you up to unenforceable terms, a lack of finality in your financial relationship, and a world of risk down the track.
You may only need one appointment with a family lawyer to ensure you are on the right track for you, in the long-term.
Associate
Related Information
- How To Separate & Divorce Well: Working Together To Plan Your Life Apart
- Are Trusts Protected From Divorce & De Facto Property Settlement Claims?
- Separation, Divorce and Business Ownership
- Financial Separation & Divorce Without A Lawyer
- How To Finalise A Property Settlement Before EOFY
- What is Financial Disclosure? How Can I Manage it?
Additional Property Settlements, Separation & Divorce Information
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