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Asset Division In a Property Settlement After Divorce or Separation

property settlement after divorce

Separation and Divorce is a challenging and emotionally charged process, often made more complex when it comes to dividing assets. Divorce laws, specifically Family Law legislation Australia outline a systematic approach to asset division known as the “four-step process.” This process, sometimes called the “five-finding  approach,” is pivotal in determining how assets are divided between spouses. In this guide, we will explore asset are divided in a property settlement after divorce or settlement in Australia, the importance of legal advice, the concept of separation, formalising agreements, and what happens when couples cannot agree.

What the Law Says About the Division of Assets in After Separation - The Four-Step Process to Divorce Property Settlement

The Family Law Act 1975 (Cth) in Australia governs the division of assets during after a divorce, or separation. It outlines a systematic and equitable approach to dividing property, assets, and financial resources between separating spouses. The core of this law is the four-step process, which aims to ensure a fair distribution of assets. Let’s take a look at the steps:

  1. Identify and value assets and liabilities: The first step involves identifying all assets and liabilities held by both parties. Assets include the family home, bank accounts, investments, superannuation, vehicles, household items, businesses, shares and stocks and family trusts. Each assets current market value is determined, and there are various ways in which assets and financial resources can be valued. Liabilities include, but are not limited to personal, business and car loans, home mortgages, investment loans and credit card debt.
  2. Consider contributions: The court considers financial, non-financial, and homemaker and parenting contributions made by each spouse during the relationship, and post separation. Contributions may include property (including real estate), inheritances, gifts, as well as homemaking, childcare, and other non-financial contributions.
  3. Assess future needs: The court examines the financial needs and circumstances of both spouses after divorce, as well as any children’s needs. Factors such as age, health, earning capacity, child support payments, and caregiving responsibilities are all given consideration.
  4. Determine a just and equitable division: The court considers the effect of the above findings, and determines what a fair outcome may be.

The “five finding approach” is an extension of the four-step process, which adds an extra step for the court to reconsider if the division of assets is ‘just and equitable’ before assessing the parties contributions. This was made clear in the High Court decision of Stanford v Stanford [2012] HCA 52.

Do I Need Legal Advice?

Seeking legal advice during a divorce settlement in Australia is highly recommended, particularly regarding asset division. As divorce proceedings are often complicated, legal experts can provide essential guidance to ensure your rights and interests remain protected. Here’s why legal advice is so crucial:
    • Understanding your rights: A qualified family lawyer can help you understand your legal rights, responsibilities, and entitlements during the asset division. They can explain how the four-step process applies to your situation and help you navigate the legal system. Each party’s circumstances are different and thus a family lawyer can provide tailored advice.
    • Negotiation and representation: A skilled lawyer can represent your interests in negotiations with your ex-spouse. They can advocate on your behalf and help you achieve a fair settlement.
    • Expertise in family law: Family law in Australia is complex and continually evolving. Legal professionals stay up-to-date with the latest legal developments, ensuring you receive accurate and relevant advice.
    • Minimising stress and emotions: Divorce can be emotionally taxing, and having a family lawyer by your side can help ease the process by providing a rational and objective perspective.

What Is a Separation

Before the process of asset division begins, it’s essential to understand what constitutes a legal separation. In Australia, couples do not need to go through a formal process to be considered legally separated. Separation can also occur while both spouses live under the same roof as long as they are no longer living as a couple. Essentially, the relationship must have broken down to the point where there is no reasonable likelihood of reconciliation.

It is, however, recommended to document the date of separation, as it can be important when determining the value of assets and liabilities at the time of separation.. In some circumstances it may be necessary to notify Centrelink of the date of separation

How to Formalise an Agreement

For asset division to be legally binding and transparent, it is advisable and crucial to formalise an agreement. There are several ways to achieve this:

    • Consent Orders: A Consent Order is a legally binding agreement that outlines the division of assets, liabilities, and financial resources between parties in accordance with their negotiated agreement. It can also formalise any parenting arrangements, if both parties wish to do so. These orders are approved by the court, ensuring that both parties comply with the agreed terms. Consent Orders can be entered into before or after divorce, however receiving individual advice about the appropriateness and timing of Consent Orders is crucial.
    • Binding Financial Agreement (BFA): A BFA is a private contract between spouses that details the division of assets and financial matters in accordance with an agreement. It must be signed by both parties and each party must receive independent legal advice for the BFA to be binding. A BFA can be entered into before or after divorce, however receiving individual advice about the appropriateness and timing of a BFA is crucial. 

These formal agreements help minimise disputes and clarify asset division, contributing to a smoother divorce process. It is important to know that in most situations any agreement that does not meet the proper requirements to be a binding agreement for family law purposes, is unlikely to be able to be relied on at a later stage.

What Happens If We Cannot Agree?

In some cases, divorcing and separating couples may find it challenging to reach a mutual agreement regarding asset division. When an agreement cannot be reached, the matter may need to be resolved through court proceedings. The court will then follow the four-step process, or the five-finding approach, to determine a just and equitable division of assets.

During this process, the court may issue orders for the sale of property, the transfer of assets, or the payment of a lump sum. The court’s decision is legally binding, and both parties must comply with the court orders.

In conclusion, asset division during a divorce in Australia follows a systematic and equitable process known as the four-step process (or five-finding-approach). Seeking legal advice is strongly recommended to navigate this process effectively and ensure your rights are protected. Understanding the concept of separation and formalising agreements can also contribute to a smoother divorce process. If agreements are not reached, the court will step in to ensure a just and equitable division of assets. Divorce and separation is a challenging time, but with the proper support and knowledge, you can navigate the process with confidence and clarity.

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