The Family Law Act contains a number of provisions to help with the division of assets during divorce proceedings. Asset and property division is a complex issue, and courts must consider a number of variables when making their decision. In this post, we will discuss some of these variables and look at what is considered to be marital property.
What is Considered Marital Property in a Divorce?
Whilst at law there is no such thing as “marital property”, it is a popular term to describe all earnings during the marriage and everything acquired with those earnings. For example, if you and your spouse bought a house together and continually paid a joint mortgage, the house would be considered to be marital property. Likewise, any debts accrued together are considered joint property debts.
What is Considered Separate Property?
Separate property is essentially any asset or property where it can be proven that one spouse either completely controls that asset or purchased the asset using their own funds. This is often easier to consider when marriages have only lasted a short period of time.
If one spouse ran a business before the marriage, then it may remain their property during the marriage. However, by virtue of one party providing support so that the spouse can continue to work in the business, or if the other party worked in the business, then the business becomes relevant property.
Are Trusts Considered Marital Property in Australia?
Generally speaking, any asset held in a family trust can be claimed as an asset of the marriage by your spouse if your relationship breaks down. However, a court can consider the matter with discretion. This discretion could be applied in cases where one party has an increased level of control over the trust or total control of the trust and its assets.
If you can prove that you have the right to distribute all of the trust’s income then you may be found to have control of the trust, as you would if you were a legal owner. To assess this, a court will look at:
- Whether you or your partner have benefited from the trust in the form of a loan, salary or expenses
- Any historical transactions made by the trust
- How parties have previously treated the trust, including the authority to borrow trust funds
These factors can help a court decide whether either party has effective control over a trust and whether a trust needs to be included in any settlement. If you own a family trust and are considering getting a divorce, then you should seek legal guidance immediately.
Are Inheritances Considered Marital Property?
Whether an inheritance is considered to be marital property is usually down to the timing of the inheritance.
For example, if an inheritance is received by a party while still married, the inheritance may be treated as a financial contribution made by the party who received the inheritance. For this reason, if the inheritance money is spent on things like holidays or home renovations, many courts will class it as a contribution to the marriage.
However, this interpretation may be dependent on when the contribution was received. For example, if an inheritance was received early in a long marriage, the significance may be eroded by other contributions over the period. Any inheritance money that has been spent is not available for division. However, it may still be taken into account as a financial contribution depending on the circumstances.
Any inheritance received late in the marriage or after separation is generally not included in the assets of the parties. However, in instances where the matrimonial property pool is too small to provide a fair settlement, part or some of the inheritance pool may be included.
If an inheritance comes to light after the separation but hasn’t yet been received, then it is considered to be a financial resource and is not available for division. However, this may still be taken into account in the settlement, as the beneficiary spouse has a resource they may draw upon to meet any future needs, while the non-beneficiary spouse does not.
If you receive an inheritance but take steps to quarantine it from the rest of the family assets, then a court will be more likely to recognise this and not consider the inheritance to be marital property.
In summary, although inheritances are not universally considered to be marital property, there are some instances where inheritance contributions are. Whether the inheritance is considered to be marital property will likely come down to timing. For this reason, you should consult a family lawyer to help you if this situation applies to you.
What about Windfalls?
If you and your partner come into money by the way of a windfall, such as a lottery win, then this will likely be considered joint income as part of the marriage.
The division of property during a divorce in accordance with the Family Law Act is extremely complicated. As a result, you should seek legal guidance. Through negotiation, arbitration and mediation, a family law practitioner can help to ensure you receive what you are entitled to. If you need assistance in relation to property issues after a divorce, please contact us.