The 4-Step Divorce Property Settlement Process

There are plenty of myths out there around divorce settlements, but as with most myths, they’re about as reliable as an old car.

As per the Family Court website:

“There is no formula used to divide your property. No one can tell you exactly what orders a judicial officer will make. The decision is made after all the evidence is heard and the judicial officer decides what is just and equitable based on the unique facts of your case.”

Reference: finance/property-and-money-after-separation/property- and-finances- after-separation <Accessed 7th May 2018>

It is judged on a case-by- case basis, so it’s impossible to ‘know’ how it’ll all play out. And of course, we’re not lawyers, so it is crucial for you to obtain personal legal advice before taking any steps.

But, it’s worth knowing the four steps the legal system uses when deciding how to divide property.

The Family Law Act 1975

This piece of legislation provides the guidance for what courts should consider when deciding financial disputes.

1. Work out what you have (and what you owe);

Before you divide up the pie, you have to know how big it is. This is where you work out your relationship ‘balance sheet’ and note down all assets and liabilities.

This includes:
– The family home (and mortgage)
– Your respective superannuation balances
– All other investments, assets and debts
– Any business holdings or assets

2. Consider the contributions – financial and non-financial – each party made to the relationship;

There are three primary elements to this step in the process:

a. What did you each bring into the relationship?
For example, did one of you already have some assets that you brought in? Or did you both come in in relatively even financial situations?

b. How did you contribute to the relationship?
There is, often, one party to the relationship responsible for generating income, with another responsible for caring for the house and children. These contributions will be taken into account.

Similarly, there are increasing numbers of people that don’t conform to these traditional roles, and the court will consider their respective contributions as well.

c. Were there any windfalls during the relationship?
Was there a lottery win, or an inheritance during the relationship? How much was this, and what was it used for?

3. Consider your future requirements;

I feel that this area provides the courts with a significant level of discretion when making their determinations.

Under the Family Law Act, they must look to see if there’s any further
consideration required for the future.

The Act contains a list of factors, including (note, this is not a comprehensive
– The age and health of the parties involved
– The income, property and financial resources of those involved
– Their physical and mental capacity for future gainful employment
– Commitments and responsibility for caring for any children from the relationship
– A reasonable standard of living
– Where one, or both, of the parties, are living with another partner, that financial situation will also be included

There is, it’s fair to say, a broad and encompassing range of factors for the court to consider in making their decision.

4. Is the result ‘just and equitable’

This is where the court thinks about how their order is to be implemented. If the division of assets would result in one party having all of the superannuation, and another the family home, then what’s the impact of that – does that lead to a fair outcome?

After considering these four steps, the court or Judicial Officer will issue their decision. It’s important to remember that there is no fixed formula and that courts do not start at 50/50 when making these decisions.

Finally, this process is used by the courts to make these decisions. But, if you’ve been able to strike a mutually agreed decision between the two of you, well that simplifies things no end.

As you’re no doubt aware, this is an important, complex and detailed part of life.

So if you’re going through a divorce – or thinking about it – I encourage you to obtain personal legal and financial advice to provide some guidance on how these 4 steps will affect you.

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