Separation can be incredibly stressful.
Going through a breakdown in a relationship can be one of the most difficult things you will go through in your lifetime. Whether you are going through a divorce or a de facto separation, the question arises: what is the division of assets in divorce? The process itself can be incredibly complex and confusing without knowledgeable Melbourne divorce lawyers to guide you.
One area that often causes confusion for recently separated couples is how assets are divided in a divorce or de facto split. There are so many misconceptions regarding how assets are divided in a divorce or de facto split that make this area extremely difficult to navigate.
In this article, we will break down:
- How to split assets after separation.
- How property is divided after a divorce.
- Some commonly asked questions which often arise throughout this process.
Melbourne Law Studio can put you in the best position moving forward so that you can get back to looking forward to the future.
Before we talk about the division of assets in divorce or de facto split, it’s really important to know how a divorce is defined in Australia and how you can go about getting one when you decide it’s time.
At Melbourne Law Studio, we’ve got your legal concerns covered. Book your free 15-minute consultation today to see how we can help.
What is a divorce?
Like many countries, Australia defines divorce as the ending of a marriage. It is important to consider that you are only allowed to remarry once your divorce has been finalised.
In 1975, Australia adopted a no-fault divorce system. This means that when the Court grants a divorce it doesn’t consider who is at fault, only that there was an irreparable breakdown in the marriage and there’s no reasonable likelihood that the two parties will get back together.
In Australia, all grounds for divorce are equal because only one applies:
“There has been an irretrievable breakdown of the marriage, evidenced by a twelve-month separation immediately preceding the date of the filing of an application for divorce.”
A court will not take into account why the marriage ended but whether or not the marriage has been broken down for a continuous period of no less than 12 months and that there is no likelihood that the parties will get back together.
How are assets divided in a divorce of de facto split in Australia?
A common misconception is that divorce and property settlement are the same thing. In fact, they are both completely separate from each other. A divorce is the legal termination of the marriage, and a property settlement is the division of assets.
There is no formula for dividing assets at the time of separation. Each case is unique, and the court will make a decision after hearing all the facts about your case.
It’s quite common for separated parties to discuss the division of assets while they are still living together. Even before their divorce has been finalised. In fact, it is much more beneficial for both parties to agree on the division of assets in divorce, as documented by the Family Law Court of Australia.
Couples that are in agreement on how to split assets during their divorce process or de facto split have the added benefits of:
- Being able to make their own decisions.
- Vastly reducing the financial and emotional costs of legal proceedings.
- Having a healthier continuing relationship, especially if the couple have children.
- Can move forward with each other’s lives and look towards the future.
- Maintaining open communication with each other should any more disputes arise.
It’s important to note that Australia is an equitable distribution country, which means that there is no ‘set split’ amount that is applied across the board. The fact that negotiations start from 50/50 is a good indicator that the actual final ratio of distribution of the assets will be based on fairness and equity.
Couples have a lot more power if they take a collaborative approach. Although we appreciate this may not always be possible, we will encourage the parties to come to an agreement about what ought to be included in an asset pool whenever possible.
It is not true that a woman will ‘get everything’, nor is it true that the person with the most money to spend on lawyers will ‘win it all’. Property division is not straightforward, which is why it is important to get the right legal advice as soon as possible. Even if you and your partner agree, it is better to seek assurance from a qualified professional as opposed to relying on your own intuition.
In order to determine how assets are divided after a divorce, a four-step process is used. Keep in mind that each matter is different and that your circumstances are your own. You can always refer to our informative articles to get your bearings or alternatively, go to the Family Law Act. As a rule, it is best to avoid listening to gossip and other peoples’ stories.
Step 1 - Determine Asset Pool and Value the Assets
During divorce splitting assets is determined by first:
- Identifying the assets; and
- Attributing a proper value.
The above is called creating an asset pool.
It doesn’t matter if the assets were acquired before the marriage, during or after separation; all assets, liabilities and financial resources ought to be identified and valued.
The term ‘assets’ can be extended to anything that holds value and includes savings, real estate, cars, jewellery, inheritance, redundancy packages, and even lottery winnings.
Superannuation benefits can also be included unless one party has superannuation overseas. If this is the case, it is considered a financial resource. In most cases, superannuation is considered separately from the general pool of assets and used to make any necessary adjustments to the final outcome.
Liabilities means anything that one or both of the parties are financially responsible for, like debts, mortgages, personal debts, or any loans.
Financial resources refers to anything that is not property that is within the asset pool, and could potentially be of monetary value in the future. This includes pensions and interests in a trust or an anticipated inheritance. Flight points have also been considered in this category as well as shares held in companies as investments. Keep in mind that the world is changing, and cryptocurrency as well would fall under the definition of an asset or financial resource.
Step 2 - Valuing The Contributions Of Each Party
The next step in splitting assets during a divorce or de facto split is to determine the financial and non-financial contributions of the two parties in the relationship. The contributions before the marriage began, during the marriage and after the relationship are all considered. Adjustments are then made to the pool of assets on a percentage basis.
Financial contributions include direct or non-direct contributions related to the acquisition, maintenance, or improvement of either party’s property.
It can include but is not limited to:
- Real estate
- Dividend payments
Non-financial contributions are more concerned with the intangible things that help improve or maintain the welfare of the relationship, the home or family if the couple have children. This may be things like homemaking, parenting, self-labour in the matrimonial home (painting, handywork, renovations) and much more.
When determining how assets are to be divided during a divorce in Australia, consideration of whether one party has ‘wasted’ assets will also be taken into account. If one party has spent a vast amount of money on gambling, alcohol or similar activities, adjustments can be made so that the other party is adequately compensated.
Step 3 - Determining Future Needs
Now, the process will move towards determining the future needs of both parties. There are a range of factors used to calculate these needs, here are a view that will determine how assets are divided after divorce:
- Who looks after the children
- Earning capacity
- Each parties’ financial resources
- Future financial circumstances of any relationship
This is the stage in the splitting assets process where the Court considers if any further adjustments need to be made to the pool of assets in regard to both parties’ future needs. If children are involved, the parent who takes care of and supports the children will likely receive a more beneficial split of assets.
Step 4 - Considering The Practical Effect
When getting a divorce, splitting assets is also determined by considering whether the practical effect on both parties is just and equitable after judging the case against the three steps outlined above.
Every division of assets after divorce is a unique case. That is why it is so important to have a responsible and knowledgeable family lawyer who can guide you through this complicated process.
How Melbourne Law Studio Can Help
At Melbourne Law Studio, we pride ourselves on offering family lawyers who genuinely care about you and want to provide the best outcome possible. We have vast experience mitigating a range of family law issues and can help you navigate the often confusing and complicated matters that arise when dealing with family law.
Contacting a knowledgeable family lawyer when you and your former partner are determining how to split assets is crucial. If you do not know what you are entitled to, it is very possible that you will receive an unfair split of assets. Remember that what may seem like a good deal now could potentially leave you without later down the track.
Receiving advice on your family law matters is:
- Responsible: Make sure you have the peace of mind of sound legal advice when making huge life decisions.
- Cost-effective: Seeking advice in the preliminary stage could end up saving you huge amounts of money.
- Preventive: We often see clients who didn’t seek advice before dividing assets at the time of their split or divorce, which has led to a lot of pain, confusion and lost time seeking to improve their situation.
However, you decide to split assets after separation, our friendly Melbourne divorce lawyers are here to help. To see if we are the right law studio for you, book a zero-obligation, completely free initial consultation below and we’ll help put you on the right track, whatever your situation might be.
At Melbourne Law Studio, we’ve got your legal concerns covered. Book your free 15-minute consultation today to see how we can help.
The split of assets following separation is determined by following the four-step process which is outlined in the sections above. In short, while a 50-50 split of assets can certainly occur, it is by no means the case for every divorce.
Depending on a variety of factors, the asset pool could be split many ways. It all depends on both parties’ contributions before, during and after the marriage and what the future circumstances of both parties are.
Dividing assets after separation can be incredibly stressful. It’s not uncommon for emotions to be high during the asset splitting process and as a result, costly mistakes can be made by both parties.
The following are some things you should never do during the separation process:
Don’t forego legal advice: Probably one of the most important things to be during the divorce process is informed. To do this, you need to seek legal advice. It’s so important to have a trusted and knowledgeable divorce lawyer on your side who can navigate the complications and pressures that occur when dividing assets during a divorce. Melbourne Law Studio can offer friendly divorce lawyers to guide you during this difficult time.
- Don’t post about the divorce on social media: While it can be tempting to get on social media and tell the world about your partner’s downfalls, it’s extremely important that you don’t. Anything you post on social media can be used against you in the divorce process and it could also alienate any friends you share with your former partner.
- Don’t get advice from friends: While it can certainly be helpful to have people around you who have been through what you’re going through, it’s really important that you do not take their word as fact. Divorce proceedings are unique to every couple and your friends could be unknowingly giving you incorrect information.
- Avoid spending from joint accounts: Many people separate from their partner and go on lavish spending sprees and buy luxurious items. While this can help ease short term pain, you can get in a lot of trouble if you are accused of dissipating assets. So, save the big spending until after the divorce is finalised.
- Don’t forget about what’s best for your children: If you have children, divorce can be an extremely confusing and difficult time. You need to avoid using your child as a way to get back at your ex-spouse during the proceedings and keep in mind what’s best for their future, not just yours.
Marital property is anything that is acquired during a marriage or any earnings that were earned during the marriage. Any debts that were made during the marriage are considered marital property, as well as if you and your spouse purchase a house and then continue to make joint mortgage payments.
Both parties are legally entitled to remain in the shared home during the divorce process if both parties are named in the tenancy agreement. However, most couples going through a divorce seek to separate from each other to avoid unnecessary tension and stress.
However, if one party has suffered domestic violence and their safety is at risk, the police should be contacted to arrange proper living arrangements.
Melbourne Divorce Lawyers Can Help
Getting a divorce can be stressful and confusing. Our team of Melbourne divorce lawyers can help you manage the process. Melbourne Law Studio has offices in Melbourne’s CBD, St Kilda, Balaclava, Brighton, Toorak, Elsternwick, and the Mornington Peninsula. Call us today on 03 9021 1421 or contact us online to book a free consultation.