How are Assets Divided in a Divorce?
The divorce rate in Australia is at its lowest level since 1976, when the Family Law Act was introduced. However, with a current divorce rate of 1.9, divorce is sadly still an outcome for many marriages across Australia.
Deciding ‘who gets what property’ can be complex and stressful. In this post, we will discuss how assets are divided in a divorce and outline the process of asset division during separation.
How to Divide Assets in a Divorce
If you are currently separated and considering a divorce, then it’s important you understand that there’s no mathematical formula to decide who gets what. This is because each relationship is unique. This means that there’s no ‘off the shelf solution’ and engaging a lawyer and attending mediation may be required to decide the division of assets.
The Family Law Act states that the division of assets in a divorce must be ‘just’ and ‘equitable’. Due to this, you should not assume that your assets will be split 50/50. This is because there is a lot to consider when it comes to dividing assets, including starting assets, current and past incomes, health and age. As a direct result of all this, your case will always be dealt with on an individual basis.
Another factor that can influence how assets are split in the divorce process is the knowledge of your lawyer, their process and experience. You should always seek advice from a family lawyer to help you receive what you’re entitled to from a divorce. Lawyers who specialise in family law will know the correct interpretation of the Family Law Act, as well as the circumstances and precedents set by cases that have passed through courts.
How Are Assets Defined?
As part of the divorce process, you will have to define, declare and value all of your current assets. This includes any assets you have held in partnerships, trusts or companies. The final asset pool is formed of all assets, liabilities and superannuation interests from both parties.
All parties involved must provide a full and frank disclosure of all assets, which usually involves an exchange of financial paperwork. Again, if you use a lawyer who specialises in family law, they will be able to help you put a value on any assets you hold.
Gifts and inheritances are not excluded in family law. However, significant ‘credit’ may be given to the party responsible for bringing the asset into the marriage. In some instances, the other party in the divorce may be persuaded to exclude these from the asset pool entirely.
What’s the Process for Dividing Assets in a Divorce?
Once the asset pool has been compiled and all parties agree that everything has been declared, the process involves measuring the contribution that each party made to the assets. This isn’t necessarily just financial contributions, but also includes any parental contributions (if applicable) and any contributions as a homemaker, parent or home renovator. It can also involve any indirect contributions, such as a contribution made by one party’s family or a family member. From these calculations, each party’s contributions will be assessed either as a singular percentage or range of percentages. However, this is not the final calculation in deciding who gets what.
Once current assets are listed and contributions are measured, future financial circumstances are taken into account. Here, a range of factors are considered, including the age and health of each party, which party will take primary care of any children (if applicable), whether one party has a higher earning capacity than the other, whether the relationship impacted on either party’s earning capacity (such as a career break for child care) and the length of the relationship. Once these factors have been taken into consideration, the original percentages may be adjusted.
A court can then decide whether this percentage or division is ‘just’ and ‘equitable’ under the Family Law Act.
Do I Have to Go to Court to Split Assets?
No. Only a small number of cases actually go to court. Most cases are resolved through mediation and solicitor to solicitor negotiations. Where the parties agree to split their assets in a certain way, an Application for Consent Orders can be made. Although the court must review and approve these orders, the vast majority of cases do not require anyone to attend a court date.
Although the division of assets may seem complicated, using a family lawyer can help simplify the process for you. Your lawyer can carry out any mediation required to ensure a ‘just’ and ‘equitable’ division of assets, as well as helping you with the emotional strain of the process.
Although there may not be a 50/50 split of assets or a set formula for deciding who gets what, a family lawyer can help you work out what you should receive. If you’re looking for a property settlement or asset settlement as part of a separation, then call us to see how we can help you.