The Four Step Process in your Family Law Property Settlement

Without any doubt one of the most stressful life events to go through is the breakdown of a marriage or de facto relationship and the division of property. In all property settlements there is a four step process which is followed:

  1. Ascertaining the net asset pool. Full disclosure must be given by both parties as to all assets and liabilities whether joint or personal and values assigned to each item. Once a full list of assets and liabilities is prepared the net asset pool can be calculated being the value of total assets less total liabilities.
  1. Assessment of each party’s contribution to the relationship. This involves identifying as a percentage how much each party has contributed during the relationship including direct and indirect financial and non-financial contributions as well as contributions to the welfare of the family including contributions as homemaker and parent.   Financial contributions are items such as wages, how much each party brought into the relationship, inheritances, lottery wins and any redundancy payments. Non-financial contributions are those that have added value to the asset pool; eg renovating the family home; a non-financial contribution such as this can be valued at the amount it would have cost if a third party had been engaged to carry out the work. Regarding the value of homemaker contributions whilst it is hard to place a figure on this, if one party is working and the other has full time parenting commitments the contribution of each would be considered to be equal.

           (The contributions considered in Step 2 are outlined in Section 79(4) of the Family Law Act 1975)

  1. Identifying Needs. Current and future needs are considered and if necessary the contribution-based entitlements established in Step 2 may be altered. The needs of each party that the Court will consider are age, state of health, income, physical and mental capacity to gain employment, parent or sole carer of children under the age of 18, commitments that are necessary to provide for self or a child, responsibilities of a party to support another person, standard of living, duration of the marriage, the maintenance of the property that may affect the earning capacity of a party, and the need to protect a party. Once the appropriate needs are ascertained the Court will then look at placing a value on these items.

           (The factors considered in Step 3 are outlined in Section 75(2) of the Family Law Act 1975)

  1. Who gets what and is that fair? Having ascertained the net asset pool, assessed each party’s contributions to that pool and if necessary made adjustments due to those factors outlined in Step 3, it will be determined what assets each party gets. In some cases it may result in one party having to make a cash payment to the other in order to achieve the agreed percentages. Once the percentages have been decided the court will then look at whether the division is fair to both parties. An aggrieved party may feel the percentage split is very unfair as they believe the other party was responsible for the breakdown; however the Court must be satisfied that the division is fair regardless of the cause of the breakdown.

As a general rule in a short relationship of say 2-3 years (with no children), the Court would consider a fair division to be that each party take what they brought into the relationship; whereas in a long relationship of say 20 years the starting point would be an equal 50/50 division.

If you would like to discuss your Family Law Property Settlement call Acclaim Legal on (02) 9744 0722 today.