Family law practitioners are often asked what a likely outcome will be during property settlement matters.
This is something that you do need to know so you can plan for the future and start making decisions. However, it is a general rule in our practice that we do not give an indication of this during an initial attendance. There is only so much you can cram into a 1 – 1 ½ hour appointment. We don’t know enough about your situation at that time to give you a considered opinion.
There are a number of reasons for this:
- We will generally need to review financial documents before giving you an opinion;
- We are required to obtain information from superannuation funds which can take up to 28 days to be returned;
- What you tell us is only one side of the story and you may not have certain important information that your partner has. It is not uncommon for one spouse to be the “financial manager” in a relationship and for the other to not have a full grasp of the ins and outs of your financial affairs.
After, it might be necessary to get information from your accountant and/or financial adviser, particularly if you have an investment property, share portfolio, an interest in a business, or have your superannuation in a self-managed superannuation fund. There may be financial and tax issues that we need to consider when looking at the likely outcome of a property settlement.
Once we have that information, there is a process that we need to consider when advising you. The process is generally referred to as the “four step process” – this follows a formula that the High Court has set down after having considered the relevant parts of the Family Law Act relating to property settlements.
The four step process can be summarised as:
Step 1 – What interests in property do you or your partner have and what is the net value of these interests?
This means that we need to determine:
- what the value of each asset or interest is;
- what debt each asset or property interest may have attached to it;
- what is the net value of what we sometimes refer to as the “property pool”.
Step 2 – Is it necessary for there to be some legal intervention to equitably distribute property between you and your partner?
In some cases, it may not be necessary to transfer property or require other intervention to finalise your property settlement.
However, more often than not, it will be necessary to have some type of intervention to assist in dividing property and to take advantage of benefits under legislation, including stamp duty exemptions or CGT roll-over relief.
Step 3 – Analysing the contributions and prospective needs factors that are relevant to your relationship.
These contributions and factors include:
financial and non-financial contributions at the commencement of the relationship, during the
relationship, and after separation;
parenting and homemaker contributions; gifts, inheritances, or financial assistance from family members;
adjusting factors under the legislation that may change any contribution factors.
Step 4 – Do there need to be other adjustments to ensure that justice and equity is done between the parties?
As you can see from the steps above, there is no way to generalise about contributions. There are other factors that we also need to take into account, like the length of the relationship and whether there have been any financial agreements that have been entered into which may overide the normal legislative pathway.
It is not uncommon for people to exchange war stories and give their own version of what happened in their own or other property settlements. We would caution against listening too much to this “advice” given the discretionary matters that make each matter different.