Valuation Of Assets For Property Settlement

Property settlements in these unprecedented times have truly taken a hit, thus affecting the lives of families all around Australia. A vital step that is required in negotiating a Family Law property settlements is the identification of assets, liabilities and financial resources of both parties involved. These assets include real estate, vehicles, cash, shares, investments and superannuation. It is only by assessing this asset pool that property division between the parties may be negotiated.

Unfortunately, COVID-19 has had a profound effect on the value of a wide variety of assets, with the biggest impact falling on property values on a global scale. Previous values placed on a property are in most cases now considered overvalued, thus creating a situation in which property settlement is deemed unfair by the time of executing the court order due a sudden drop in value. 

Superannuation Values

Another factor that has taken a hit due to the pandemic is superannuation values. Due to this, it is incredibly important that parties obtain updated superannuation member entitlements and share prices to ensure that your asset pool is up to date and not under or overvalued. In the current climate, it may even be appropriate to negotiate a superannuation split based on a percentage division as opposed to one calculated off a base amount in order to take into account the volatility that currently exists in the market.

It is important to note that if you are considering early access to your superannuation, it still remains uncertain as to whether the courts will consider the early release as an ‘add back’ into the parties’ property pool of assets. 

Family Maintenance and Child Support

With job security at an all time low, many people all around Australia have been experiencing lower income due to the loss of a job or reduced hours of work. If you find yourself in this predicament, it is highly advised that you contact the Department of Health and Human Services (DHHS) for a reassessment of your child support obligations. Do note that unless you are proactive in contacting the DHS, your child support obligations will remain the same, regardless of your change in income. 

Failure to comply with your child support obligations will result in the accumulation of arrears and may attract hefty penalties. In terms of spousal maintenance, the DHS also takes into account each party’s income and their capacity to meet their own expenses. Parties may also be required to contribute to any deficit in the other party’s capacity to meet their reasonable expenses.  

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Now more than ever, it is vital that you seek legal, expert and independent financial advice in relation to family law property settlement, superannuation splitting orders and any other factors that may affect your family law court proceedings and orders. You can reach our expert team of family lawyers by calling (03) 9670 7577 or by simply sending us an email at admin@oxfordpartners.com.au. 

Duty Of Disclosure

It is both you and your ex-partner’s legal obligation to provide this information to each other as an accurate means of assessment. This includes information recorded on paper, digitally stored information and documents that the other party may be unaware of. This is known as “duty of disclosure” and is an integral component of any financial and/or parenting cases.

Duty of disclosure starts before your case commences and continues right until the moment your case is finalised. Both parties are required to provide updated documents in the event that circumstances change as well as additional documents that may come into their possession within this timeframe.

Documents are considered relevant if they:

1. Are able to verify the nature and extent of the asset pool (assets, liabilities and other financial resources) of one or both parties that will be the subject of division. Some of these include: Assets and liabilities held in each party’s separate and/or joint names; Assets and liabilities held within any trusts or companies in which either or both parties have an interest.
2. Able to verify the nature and extent of the current and future income from employment and/or other sources such as a trust or company.
3. Documents that relate to the issue in dispute in the property settlement such as the contributions each person has made to the asset pool and factors relating to what each individual may require to support themselves in the future.

Documents You Will Need To Provide

Rule 13.01 of the Family Law Rules expressly states that ‘each party to a case has the duty to provide a full and frank disclosure of all information relevant to the proceedings in a timely manner’. Generally, the types of documents that both parties will be required by law to produce include:

• Bank, credit and loan statements
• Payslips
• Centrelink statements
• Shared Portfolios
• 3 most recent tax returns and notices of assessments.
• Superannuation statements
• Inheritance or gift details.
• Documents to evidence any assets disposed of or sold in the 12 months prior to separation.
• Documents that verify both party’s financial positions at the beginning of the relationship such as bank statements, valuations or purchase documents.
• Property, motor vehicle, and machinery valuations of appraisals.
• Company and trust financial statements, bank and taxation records.

While this list is not exhaustive, the advice is to gather as many documents as you possibly can to verify the nature and extent of the asset pool, as well as the extent of your contributions made during the relationship.

Failure To Disclose

It is important to note that the failure to disclose relevant documents may result in lengthy delays in negotiating or settling your dispute, and can often lead up to cases in court that result in additional, and often unnecessary, legal fees. Failure to provide full and frank disclosure of all documents will also be typically seen as evidence of hiding assets and will only be to your detriment. There are significant penalties involved for any individual who has formalised an agreement or court order with false declarations with regard to financial interests.

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Financial disclosure matters can be overwhelming during an incredibly difficult time in your life, which is why it is always recommended that you seek legal advice from a trusted family lawyer. If you have any questions or are in search of legal advice from a family law expert, do not hesitate to call us at (03) 9670 7577.

Consent Orders vs Financial Orders

The first thing a couple needs to decide on is whether they are willing to come to a mutual agreement regarding property and financial settlements. Couples who are able to agree on how assets are divided needn’t involve the courts in the process but will have to apply for consent orders in order to formalise the agreement. As with most legal cases, this mediation process is always favoured over going to court and can greatly cut down on legal fees, time and the stresses associated with battling a case at court.

Now that we’ve covered consent orders, let’s dive into financial orders. It will come as no surprise that there are many instances in which couples are unable to reach an agreement regarding settlement, and this is where financial orders come to play. Couples who are unable to resolve settlement-related conflicts are able to apply to the Family Court and F.C.C. for financial orders including orders related to the division of property and/or payment of spousal maintenance. One of the downsides of a court-ordered financial order is that no one can guarantee you what decisions a judicial offer will make — in other words, it will be up to the courts to decide what is fair and equitable based on the individual circumstances of your case.

One thing to keep in mind is that married couples are required to make applications for property and financial settlements within 12 months of a divorce becoming final. De-facto partners are granted a timeframe of up to 2 years after the breakdown of the relationship. Failing to adhere to these time restrictions will require special permission of a court which is not always granted.

What Do The Courts Take Into Consideration?

Asset Pool – Some of the main things that the courts will take into consideration include an evaluation of your assets, liabilities and superannuation available for division between both parties. This is often referred to as an “asset pool” and is determined at the time of trial (time during separation does not count).

Contributions – The second step involves a full assessment of both parties’ contributions to the relationship. These contributions can be broken down into three categories — financial, non-financial and homemaker contributions. Financial contributions include salaries, business income, investment income, any inheritance received and or gifts received. Non-financial contributions include contributions from either party that increase the value of the asset pool (home renovations, upgrades etc). Lastly, homemaker contributions include caring for the home, children and other aspects of family life even if said responsibilities do not have a monetary value attached to them.

Future Needs – The third factor that the courts will take into account are the future needs of each party. They will look into matters such as age, health, earning capacity, caring for children, financial resources, the standard of living, superannuation eligibility and the financial circumstances of a new household should either party be re-partnered.

Deciding What Is Fair and Equitable

What is “fair and equitable” to one couple may not be viewed in the same manner as another couple, which is why each and every property/financial settlement case is unique. After thoroughly assessing the asset pool, contributions and future needs of both parties, the courts make a careful decision that is deemed as fair as possible to each party involved.

How Can Oxford Partners Help You?

At Oxford Partners, we have a number of experienced lawyers who practice exclusively in the area of family law. We aim to provide highly personalised service, whether that be informing you of your rights and obligations, assisting you in mediation/dispute resolution or representing you in contested proceedings in the Family Court and Federal Circuit Court of Australia. To find out more about how we can help you with your property and financial settlements, call us at (03) 9670 7577 today.

Sorting Out The Division of Property

The first step towards property settlements under the Family Law Act is deciding or figuring out how your property is going to be divided. There are a few ways in which this can be done:

1. Mutual Agreement

In a situation where you and your former spouse can mutually agree on how your property should be divided, there will be no need for any court involvement. You can also seek to formalise your agreement by simply applying for consent orders in the Family Court. A consent order is a great way to ensure that your agreement is binding and enforceable, and also may offer you some tax benefits depending on your individual case.

2. Inability To Reach an Agreement

In some situations, you will find that both parties are unable to come to a mutual agreement. When this happens, it is important that you apply to a court for financial orders and any other orders related to the division of property and/or maintenance payments for your spouse. Most property settlements are dealt with by either the Family Court or the Federal Circuit Court, and most property settlement applications end up getting settled without a decision being made by the Court.

In situations where settlement is not achieved, the Courts will proceed to decide on how the property should be divided after a hearing before a judge.

The 4 Step Process

If and when you decide to apply for a property settlement, the Court will determine your application by the way of what is known as a “4 Step Process”.

Step 1: Identifying/Valuing assets, liabilities and financial resources of both parties

Step one involves identifying and valuing the assets, liabilities and financial resources of both parties involved in the settlement. This is a simple process in the majority of cases, but may be more complex if businesses are involved. In such a situation, it is always recommended to involve specialist experts who will be able to assist in the matter.

Step 2 – Assessing the contributions of both parties

The second step in the 4 step process is to assess the contributions made by both parties during the duration of the relationship. Contributions can include:

• Indirect or direct financial contributions to a shared property
• Contributions to the household/welfare of the family in the capacity of a parent or homemaker

Do note that in most cases, especially when long term relationships are being assessed, the Court will find that both parties have contributed equally. Some of the reasons as to why the Court may in certain circumstances find the contributions to not be equal include:

– Short term relationships with no children involved

• Situations where one party entered the relationship with significantly more assets than the other party
• Situations where one party makes a substantial contribution through personal injury settlement, inheritance or family gifts
• Situations where reckless conduct of one party resulted in a loss to the other party’s assets

Step 3 – Assessing Future Needs

The third step is to assess the future needs of both parties. The Court will consider factors such as:

• Income, property and financial resources of both parties
• Capacity for employment
• Age and health of both parties
• Who has the care of children under 18
• Eligibility for pension
• Earning capacity
• If one party is living with someone else and the financial circumstances of that household

In considering these factors, the Court will then decide on whether adjustments should be made in favour of one party to compensate for future circumstances.

Step 4 – Fair and Just Outcome

After steps 1-3, the Court will then decide on whether the proposed property settlement is one that is fair and just for both parties. This assessment is done with a holistic examination of the circumstances involved in the case.

How Can We Assist You?

At Oxford Partners, we have an expert team of lawyers who practise exclusively in the area of family law. We aim to provide you with a service that is tailored to your individual circumstances, regardless of how complex or simple the situation may be. Where appropriate, we will work with your other advisers, such as your accountant in order to get a clear understanding of all aspects of your case and provide you with the best possible services and representation.

Call us at 03 9670 7577 today!

Time Is Of The Essence

One of the most important factors to consider during property settlement in time. Negotiation is a time sensitive matter, and it is crucial to be aware that legally, there is a time limit for property settlements after divorce. This time limit is often referred to as the limitation period, and it is during this time that you are required to file proceedings for your property settlement. In most instances, the time limit is 1 year after the date of your divorce for divorced couples, and 2 years after separation for de facto couples. 

Who Gets What?

When it comes to who gets what, the waters get murky. Legally, there is no “official” way of calculating family law property settlements which is why taking the following factors into consideration is imperative: 

• What has each spouse contributed over the years to the overall acquisition of the property?
• What are the future needs of each spouse?
• Is the desired property division one that is equitable, just and fair? 
• What is the net pool that is available for division? 

Taking into consideration these factors, you will then be able to negotiate a fair and just property settlement. It is also highly advised that each individual involved in the settlement pays great attention to collecting and compiling financial paperwork as soon as possible. This paperwork may include documents such as bank statements, tax returns, pay slips and anything else that can provide a clear picture of the property values involved. 

Oftentimes, ex-partners are also required to exchange financial documentation with each other, and it’s important that you ensure that you are as honest as possible when sharing this information. In certain cases, you may even have to obtain valuations of property values if you are in dispute. Based on all this information, both (ex) spouses will then have to come to an agreement on the value of each of the assets shared. It is also important to note that each case is unique in nature, and will depend on the individual circumstances of your family. No one settlement looks like another, so it is wise to avoid trying to source information or advice from anyone else besides your lawyer. 

Calculating The Net Pool

Calculating the net pool is the first step in determining your property settlement. It is important that parties remain honest and upfront about their finances and financial situation in order for this first and integral step to allow for future negotiation. 

In property settlements, contributions taken into account include financial contributions such as gifts, inheritances and assets that were owned by each individual prior to moving in with each other. Non financial contributions are also taken into consideration, and may include things such as who took care of the home, if renovations were made and so on. Lastly, homemaker contributions take into account if one spouse is or was a stay at home parent, took care of children the majority of the time and domestic duties such as cleaning, cooking, laundry and so on. 

What About Future Needs?

Future needs of each spouse are also something that will be looked into during property settlement. This may include:

• Health of both parties
• Income of both parties (if one earns less than the other)
• Who cares for the children
• Just and equitable requests 

The Final Outcome

To reach the final outcome of your settlement, it must be deemed that the result is one that is both just and equitable to both parties. The settlement will often result in a division of the pool of property, and it is highly recommended that this decision is properly formalised in order to be seen as a legal agreement, regardless of whether you came to the decision amicably or not.  

We strongly advise that both parties heed advice from experts and lawyers that will be able to advise on individual circumstances in order to find the best way forward in finalising your property settlement after divorce.