determine each party’s contribution to those assets and the whole relationship
assess each party’s future needs
Family Law clients are often surprised to hear that there is no specific formula to determine each party’s entitlement in a property division, unlike child support for example. There is good reason for this – every party to a relationship is different, every relationship is different and everyone’s financial situation is different. The Family Law Act provides a four step process in determining a property settlement in marriage (and now in de facto relationships also):
Identify and value all the assets owned jointly or individually or on behalf of a client (ie trust or company). Full financial disclosure is required by the Family Law Act. It does not matter in whose name an asset is held – it is all part of the asset pool to be considered and possibly divided.
In a long relationship contributions are usually seen as equal. Usually one person has contributed more by way of financial contribution, and the other has contributed more by way of non-financial contribution in caring for children and maintaining the home. The Court most often treats each party’s contributions as being equal.
The Family Law Act provides a list of factors to be taken into consideration such as relative responsibility for children, health, earning capacity, age and so on. Often there is a 10%, 15% or 20% adjustment to one party, for example, where they are the primary carer of the children and have a lower earning capacity.
In the fairly typical case of a long marriage, dependent children, wife a stayat- home Mum (or part-time employee Mum), the husband with a good earning capacity and an asset pool of $1,000,000.00, the wife may get 70%. With an asset pool of $2,000,000.00 the wife may get 60% and with an asset pool of $10,000,000.00 the division to the wife is more likely to be 50%. As you can appreciate, as the asset pool gets higher, there is less need to give the “poorer” party an adjustment above 50% to help them provide for their future.
Ironically, above $10,000,000.00, if one person is responsible for the wealth, contributions may not be considered to be equal and the party with the entrepreneurial flair may be given credit for a greater contribution – essentially because their contribution is argued to be far above the norm.
At the end of the day when taking your matter to Court, you put the outcome of your property settlement in the hands of the Judge or Federal Magistrate on the day. The Family Law Act does not provide a formula, but gives the Judge or Federal Magistrate a process which he or she must apply. In theory they are objective. In practice, there is a good deal of subjectivity, and different judges will give different results.
After all, what is just and equitable to one, may not be to another. That is good incentive to resolve a property matter through collaboration, mediation or negotiation. Or enter into a prenuptial binding financial agreement and avoid Court altogether. Do ask us about the alternative, and least stressful, ways of resolving these matters.
Disclaimer : This article provides basic information only and is not a substitute for a professional or legal advice. It is prudent to obtain legal advice from a family lawyer.