In a family law property settlement, a lot of time is spent focused on the end game but what happens in the short term can sometimes be more important.
When it comes to interim property orders, there are various types that the court may need to make in order to preserve or sell assets, deal with who is remaining in the home or change child support assessments.
The court can also address issues like making sure that the bills get paid or that some cash is freed up in the short term for living expenses. While it may not be appropriate in every situation, the court has the power (and does exercise it) to provide a party with access to cash or assets before it is known what is happening on a final basis.
There are three main types of interim property orders that the courts tend to look at in these circumstances:
- Maintenance: a weekly or lump sum amount towards the reasonable living expenses of a party that cannot meet their own expenses from income or assets.
- Part property settlement: some money or assets released to a party before a final property settlement is completed that is taken into account as having already been received by them when final orders are made.
- Payment towards legal fees: whether as a lump sum or payment at various stages, the court has wide discretion to make orders towards payment of a party’s legal fees.
The Family Law Act gives a judge broad discretion to make orders that are proper for the maintenance of a party. The language of the Act is in neutral terms and it does not matter whether you were a stay at home mum or dad, or a person that has stopped work for another reason such as retraining or retirement. The court is really interested in the detail of each party’s income and expenses and what is a reasonable standard of living for both parties in the short term.
As to what is “reasonable” or “proper”, that question is a lot harder to answer and what may be appropriate in one situation may be very different from another.
While in some circumstances there may be an abundance of income and assets to be able to comfortably support two households after separation, that situation doesn’t tend to be the case very often. In the majority of circumstances, the first few months (or years) after separation may be very difficult financially while both parties set about the task of rebuilding.
The list of the expenses that the court can take into account is not exhaustive but, to give you an idea, the list of expenses from the court form are reproduced below:
Expenses that may be taken into account
- Income tax
- Compulsory Superannuation payments
- Mortgage repayments/rates or rent
- Insurance premiums
- Vehicle rego
- Lease or loan repayments
- Credit Card payments
- Household supplies
- House repairs
- Heating fuel
- Motor vehicle -– petrol & maintenance
- Fares/car parking
- Clothing and shoes
- Children’s activities
- Child minding
- Medical, dental and optical (not including health insurance premiums)
- Education expenses, including fees and levies
- Cleaning (house/pool)
- Repairs – furnishings and appliances
- Dry cleaning
- Books and magazines
- Hairdressing, toiletries
- Other necessary commitments
To be clear, just because the court can take into account discretionary spending on things like entertainment, holidays, books and magazines, gifts and hairdressing, those expenses tend to be the first items to be cut as unreasonable.
Part property settlement
When it comes to paying out funds to a party before there is agreement about the final outcome, the court tends to be cautious.
At an early stage the court may not have a clear idea about what the assets are worth and what each party is likely to receive on a final basis. Where possible, the court tends to prefer to make one set of final orders that will deal with all of the property rather than dealing with things in a piecemeal way. However, sometimes that situation can’t be avoided.
For example, after separation there may be no option other than for the house to be sold and the mortgage repaid before your property settlement is complete. One or both parties may need to ask the court for an order for an amount from the sale proceeds to be released to them towards the costs for them to re-establish themselves in a new home with things like bond payments, rent in advance, basic furniture and moving costs. In that situation, the court may be persuaded to give each party a modest amount from the sale proceeds towards those costs while the balance remains invested in a trust account.
Again, it all comes down to the circumstances and there are lots of other situations where a party may need an amount of their property settlement before the final outcome is known.
Payment towards legal fees
The starting point in family law matters is that generally each party is responsible for paying their own legal fees. The Court accepts, however, that in some situations, for example, where one party has been out of the work force for some time or where all the assets are controlled by one party, it may be necessary to help level the playing field by releasing funds to pay legal fees.
Getting funds released early can be tricky but in the right circumstances it may be the best option. It’s a careful balancing act between ensuring that there is a level playing field between parties to be able to afford their choice of legal representation and, on the other hand, the rights of both parties to a fair property settlement on a final basis.
The judge hearing the matter has to carefully weigh up the competing rights of a party that says they genuinely need funds to be able to pay their legal fees as against what each party says they should receive on a final basis.
To be clear, the above is simply a guide about some of the types of orders the court can make. Whether they are likely to apply to you and your circumstances needs to be carefully considered and it is essential to have quality legal advice before starting any court proceedings or negotiation for interim property settlement.