Courts in family law cases employ a four-step analysis when entering a financial order

Property settlement proceedings in family law cases are heard in either the Family Court or the Federal Circuit Court (formerly known as the Federal Magistrate’s Court). They are governed by section 79 of the Family Law Act.

Although parties are encouraged (and usually required) to attempt to resolve their differences before applying to the court for a financial order, the court will fashion a property settlement if the parties cannot agree on one.

Federal Circuit Judge Michael Bauman has summarized the four steps that judges must follow when parties have applied for a property settlement. Parties need to understand and keep these steps in mind when preparing their cases for court.

Step one - identify assets and liabilities

The court cannot divide property equitably without knowing what property the parties own and what debts they owe. Parties need to present competent evidence of the value of all the property they own as of the date of the hearing. Just as importantly, the court must know what property and debt existed on the date the parties began to cohabit. Particularly when a relationship did not last long, the court might be inclined to return property to the party who brought it into the relationship. In addition, the court will examine the individual or joint use the parties made of property that was contributed to the relationship to determine whether the parties treated it as an individual or shared property.

Step two - identify contributions

Section 79(4) of the Family Law Act requires the court to consider the contributions, both financial and nonfinancial, that each party made to the marriage. This includes not only the property brought into the relationship (as noted above), but also contributions made during the course of the marriage.

The court might decide that one party’s larger financial contribution (in the form of higher wages, for instance) is at least partially offset by the other party’s provision of homemaker and childcare services that made it possible for the larger wage earner to do his or her job. Contributions made by outside parties (such as parents of either spouse) must also be considered, as well the contributor’s intent to benefit only one spouse or both of them.

Step three - identify other relevant factors

Pursuant to section 79(4)FLA, the court must also consider:

• The effect of a proposed property settlement upon a party’s earning capacity.
• Factors that are relevant to spousal maintenance, including the length of the marriage; each spouse’s age, health, and earning ability; child care responsibilities; other commitments and responsibilities; pension eligibility; standard of living; the effect of cohabitation with another person on the party’s financial circumstances; and other facts that are relevant to a fair determination.
• Other orders made under the Family Law Act.
• Child support the party is or will be required to pay.

Step four — make a just and equitable order

Once the court has a full understanding of the contributions each party made to the marriage and other factors that affect the fairness of a property settlement, the court decides what percentage of the property and debt should be awarded to each party.

The ultimate goal is to be fair, but the fairness determination is driven by the findings made during the first three steps. It is therefore essential that each party present the court with complete and reliable information about the contributions made by that party to the marriage as well as the other factors made relevant by section 79(4)FLA.