Separation is never an easy process, and trying to navigate the delicate nature of how to divide assets, which financial documents need to be signed, and what legal processes need to be adhered to can cause more than a few headaches.
When you add property division to the mix, things can get complicated. The goal of a financial separation is to come to a mutual agreement that sees assets divided fairly between both parties based on their financial resources and non-financial contributions. For most people, the first question is, ‘How are assets divided in a divorce?’ and ‘What are the husband’s rights in separation?’
That answer isn’t black and white.
What is a Financial Separation, and how does it differ from a standard Divorce Settlement?
If you’re in the process of dividing assets and you’re working towards a property settlement that supports both parties, you’ve probably come across the term ‘financial separation’ more than a few times.
It’s certainly a kinder phrase than ‘divorce’, but what does it actually mean? Basically, financial separation is the legal term used to outline the division of shared assets between spouses during a divorce or other related proceeding. Financial separation comes after a couple has split and is designed to protect both parties who are exiting a financial relationship.
Like anything, there are pros and cons to the financial separation route. For instance, you may save money by not needing to pay for your partner’s credit card debt. You can also avoid paying child support. However, depending on the nature of your relationship, your partner may claim that you are still responsible for paying child support.
Is it 50/50 in a Financial Separation?
Maybe, maybe not. If you haven’t contributed the same financial resources and don’t have equal future needs, you aren’t likely to get a 50/50 property settlement. It’s a nice starting point, but then adjustments are made based on numerous factors, from financial resources to non-financial contributions.
These factors can include everything from credit card debt, business loans, and mutual funds to the nature of the relationship between both parties.
We have written extensively about those adjustments and how assets are split in a divorce previously. This article will discuss the likely outcome of some property settlement cases and if you will go halves with your wife/husband/former spouse.
Many people assume that just because you have gone 50/50 throughout the relationship, you will somehow end up with 50% of the assets (or debts!). Actually, the family court uses what we call a 4 (or 5) step approach to determine who gets what in divorce or separation.
Most commonly, people end up with 60/40 or even 70/30. Rarely do they get half of the assets divided in a typical divorce settlement in Australia.
Examples of Divorce Property Settlement in Australia
A multitude of situations exists in The Family Law Act, and we have presented some examples below of how a property settlement can play out. Take these property settlements with a grain of salt, and remember, every situation is different when it comes to property division.
You only had a short relationship with your former spouse, and one of you contributed the majority to the asset pool
What you might expect in this situation – Maybe 60/40, maybe 70/30 and maybe even nothing
It’s probably not fair to divide assets down the middle if one of you contributed the majority of the asset pool and you’ve been together for only a short time. It’s likely the initial assets might be kept out of the asset pool altogether, or the court would make an adjustment in the contributing person‘s favour.
What is the exception to this case?
If the couple have young children together and one of the parties (usually the mother) has majority care of the child, that party could argue that a 50/50 split is fair. The asset pool, in this case, might be separated to include only post-relationship assets and liabilities.
If you have been together for a long time and one brought in all the assets
What you might expect in this situation – Maybe 30/70, maybe 40/60 and maybe even 50/50.
If you have had a long relationship and one brought in or was personally gifted the assets, you might find an adjustment in their favour, but it depends on the relationship’s length. In most cases, the parties will have contributed to the relationship equally when the relationship has been long.
What is the exception to this case?
Suppose the other party has future needs or equally contributed to those assets they might adjust in their favour. It’s tough to determine specifically what would happen in this case.
If you built up the assets together, but one worked, and one can’t or has not worked
While you may have made direct financial contributions to the assets through your work, the other party likely made non-financial contributions to your work by looking after the house or children. Therefore, it’s likely that contributions will be the same. Additionally, when we look at future needs, the court might adjust the spouse’s case if they need future support to enter the workforce or retrain. It’s likely a 50/50 split wouldn’t be fair in this case.
So will we get half or not?
Each financial separation is very different; the above cases aren’t specific, and multiple factors may come into play with financial agreements and financial support. It’s essential to speak to a qualified family law solicitor to determine what financial arrangements will come into play in your case and to give you an assessment of what financial support you are entitled to.
Even with that financial assessment, it’s a matter of getting the split done. Again, more factors come into play like is it worth arguing over 5-10% when you consider the legal fees? In a small asset pool, you might not argue; in a large property pool, it might be worth it. Also, what about future liabilities due to assets like capital gain tax? Is the split fair if one party will have to by CGT on an asset and the other party keeps the family home?
When all of these things are considered, a 50/50 split is very rare in our experience.
Do you have to divide assets in a divorce?
When it comes to understanding how do assets get split in a divorce settlement, the Family Law Act sets out what will be divided when determining how property should be divided. For separating property or asset division in general, the best practice is to come to an agreement, which then becomes a consent order that both parties can follow. It can be helpful to seek legal advice if you are having difficulty negotiating asset division. Even if you do reach an agreement, pursuing independent legal advice is important before signing any paperwork or agreeing to any terms.
In Conclusion
Reaching an agreement around what gets divided in a divorce settlement is never easy, but with the right legal advice, both parties can reach a property settlement that meets their respective needs. While a 50/50 financial separation might seem like the easiest conclusion, it fails to take into account the unique nature of each relationship.
If you need help reaching a property settlement in divorce cases or require assistance in asset division, consult with our experienced team of property settlement lawyers today.
