The Critical Factors That Lead To An Unequal Division Of Assets In A Property Settlement
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When you are a couple who has separated and wants to move forward with your lives, dividing your property, should be simple and straightforward.
On many occasions, this is not the case, and how the pie is to be divided, and who keeps which assets can be problematic and often the biggest hurdle to overcome.
That’s where your online property settlement comes in
Your online property settlement was created to provide Australia’s first online end-to-end service by a law firm, dedicated solely to dividing property, including superannuation.
The team at your online property settlement has assisted thousands of individuals in obtaining their divorce so they can move forward with their lives.
They can also assist in the division of property upon a marital or de facto separation.
Keep reading to find out how property assets are assessed upon separation and why an unequal division could be the fairest result.
What is a Property Settlement versus a Divorce?
If you are still yet to be divorced, or unsure on what to do about a divorce, we have covered off on this in a seperate blog that you can READ HERE
A Property Settlement is the division of assets [and liabilities] between a married, or de facto couple who are separating.
A Divorce is the legal ending of a marriage.
The only relationship between the two is that you need to have finalised your property settlement within 12 months of your divorce certificate, being issued by the court, otherwise, you need permission or leave of the court to divide your property.
This permission is not easily obtained on the basis that the court presumes you ought to have resolved your property division during this period of time.
Your Online Property Settlement (YOPS) suggests you should sort out your property settlement first and then your divorce to avoid any time limit problems.
What is a 70/30 Division of Property?
70/30 refers to one of the separated parties receiving 70%, and the other party receiving 30% of the property pool.
Property includes all the assets and liabilities of the parties to the relationship.
Is a 70/30 split common? 🤔
Not really but it is a common question.
Every property settlement depends on its own circumstances, and there are no presumption of a specific division, be they 50/50, 70/30 or something else.
To make consent orders, when determining a matter at final hearing, the court will go through a process to calculate the division.
To work out if a variation from a 50/50 split is needed, the following four steps are considered: –
1. the size of the property pool in terms of its value
2. how did each party contribute to the current property pool, for example, the contribution of an inheritance
3. are there any specific factors that may impact the future earnings and the living circumstances of each party, for example, the expense of the care of children.
4. Is the outcome of final division fair based on the previous three factors and any other relevant considerations?
Let’s take a closer look at each of the above four steps. 🪜
What can be included in the ‘Asset Pool’?
The first step is to look at all assets and financial resources involved in the property settlement.
This will include everything the parties currently own [even assets or debts acquired before the relationship] and those assets bought after separation by either party, although these may be treated differently because of who contributed to them.
Cash and money in the bank
Household furniture and equipment
Trailers, caravans and RV’s
Shares or businesses owned by the parties
Superannuation held by both parties
Any home loan or property loans
A car or personal loan
Loans by family – these can be a bit tricky based on how long ago the loan was given and the conditions around repayment
HECS debt (only considered in certain cases)
Assets and debts are included at the value at the date of a court hearing or the date of the agreement being reached rather than at the date of separation. This is because the value could change very quickly, and it may be unfair to use and much earlier value.
Assessing Contributions by Each Party
The second important step is assessing the contributions made by each party towards the total property pool. These contributions include financial and non-financial contributions.
One party may have had significant savings or a home at the time cohabitation commenced.
Gifts from family members may be a direct contribution. Where one party gave up a career to have the children this would be an indirect or non-financial contribution.
Consideration must go towards the contribution of each party at the start, during and after the relationship
It is common, however, that overall contributions can be assessed as equal, especially in longer relationships.
The court will not place special favour on financial versus non-financial contributions and often balances these out equally.
As an example of contributions looking at a 70/30 vs 50/50 settlement just because one party earned more and therefore paid more of the expenses, it does not automatically mean that they get a greater adjustment in their favour.
It is generally not a dollar for dollar exercise and financial contributions may well be equally offset by the other party, having a greater care component for the children.
Considering the Future for Each Party
The third step is assessing what is commonly called ‘future needs’ and reviewing the ability of each party to support themselves moving forward.
Important factors considered for each party include:-
State of health
Income earning capacity
Who provides the expense and time required for the care of any children?
The overall size of the asset pool – a large pool, may mean that future needs are reduced.
If one party has the primary care of young children after separation and has a lower income earning capacity an adjustment of the property in their favour is likely, due to these factors.
However, other contributions will be considered, for example, the other spouse contributed a large portion of the assets to the relationship.
What is Fair?
The fourth and final step is to look at whether an outcome from the above three stages is fair and whether any other factors must be considered. The property pool size is a genuine consideration here and also, how the assets will be split is important.
Well, as an example, if one party retains the former matrimonial home which is an asset capable of being sold, versus the other party retaining mostly superannuation which may not be accessible for many years then there is an imbalance in how the value of each can be used.
In our experience, it is quite rare for a final adjustment to be made for fairness factors and the issue of contributions and future needs is more heavily considered or weighted.
Case Study One
Anita and Phil were in a de facto relationship for a period of 5 years.
Anita had purchased a home when she was younger, and at the time of the commencement of their cohabitation, there was about $300,000 of equity in the home if it was sold.
During the relationship, both parties worked, and Phil earned a little bit more than Anita.
Both of them had some other smaller assets such as a motor vehicle and a little bit of cash at the bank at the time of separation.
When they reached an agreement about dividing their assets, the value of the house less the mortgage had increased to about $500,000.
Both Anita and Phil could continue to work after separation and they had no children.
Due to the large lump sum contribution by Anita with her house at the start of the relationship, the court decided that a 70/30 division was appropriate to reflect that lump sum contribution.
There were no other adjustments, as both parties had an earning capacity going forward which had not been impacted by the relationship.
Additionally, because the equity in the house had increased Anita had to borrow a little bit extra from the bank to pay cash to Phil for his 30% share of the assets.
Case Study Two
Emma and Jason married at an early age.
They had 4 children of the relationship and separated after 15 years together.
At this time the children were between 4 and 10 years of age. Emma was a nurse and could work part time following separation as she had the predominant share of care for the 4 children.
Jason was a carpenter and worked full-time.
Although Jason paid child support, the value of the asset pool of both parties was quite small so the court awarded a much larger share to Emma to allow for the expense of care for the 4 children and the fact that she could only work part time.
A 70/30 division took into account these factors.
Case Study Three
Dale and Lianne were married for about 20 years.
When they separated they had assets including their home and investments valued at about $500,000.
However, Lianne also had nearly $1 million in her bank account due to an inheritance she had received just before separation.
The court took into account that Dale had not made a contribution equal to this inheritance, but the court did include it in the asset pool as an asset of the relationship.
The court, however, adjusted the division of the assets, 70/30 in favour of Lianne to allow for her “contribution“to the inheritance.
Interestingly, had the inheritance been received after separation the court may have considered adopting a different approach by deeming that Lianne retains the inheritance completely but then giving a much larger share of the remaining $500,000 in favour of Dale to reflect the financial resource of the inheritance held by Lianne.
This reflects just how tricky the assessment of contributions can be when working out an overall adjustment between the parties that is fair.
Where Your Online Property Settlement Can Help
Resolving your property settlement helps you move on with your life and plan for the future.
Reaching a fair agreement between you and you’re separated spouse is important.
If you need some assistance then YOPS can assist in arranging a mediation with a highly qualified mediator, who will help achieve a new solution.
Once an agreement is reached, before or after mediation, then YOPS can document that agreement and save you thousands of dollars by doing it online from the safety and comfort of your home.
For further details or information
Visit our website – www.propertysettlementonline.com.au
or send us an email to email@example.com
We can discuss your individual circumstances at no initial financial obligation.
Best wishes – The Team at Your Online Property Settlement
Your Online Legal Group Team