Financial Settlements – How is the Split Determined



Publish Date: Aug 22, 2010

The purpose of a financial settlement is to bring to an end the financial relationship between the parties, by dividing and allocating their net assets, so that nothing is left in joint names.

For experienced family lawyers, predicting the likely settlement is not difficult. What a lot of lay people do not appreciate, unless they seek legal advice, is that a financial settlement does not entitle you to receive a wish-list. You have an entitlement to receive a percentage of what exists, and if you propose a particular settlement, then you have an obligation to justify that outcome.

A methodology is used to determine your entitlements, and it is a four step methodology.

Step 1 requires a family balance sheet of assets and liabilities. This identifies and values all assets and liabilities regardless of in whose name a particular asset may be held. A separate listing is prepared for superannuation, which is treated as a different class of property. The Family Law Act requires a full disclosure of each party's financial position, and valuations or appraisals of the worth of various types of properties are usually obtained and exchanged as part of the process.

Step 2 involves an assessment of contributions by or on behalf of a party. These contributions will be both financial and non-financial, and so contributions as a parent and homemaker are given a real value. Contributions are assessed up until the time settlement is being considered, and the assessment itself is not a strictly mathematical exercise. Your family lawyer will be able to do this assessment for you and provide reasons for their view.

Step 3 involves assessing whether there are any reasons why either party will be entitled to an additional percentage of the net assets, and if so assessing what that additional percentage entitlement should be.

Step 4 then requires adding the percentages assessed at steps 2 and 3 to determine what overall percentage of the net assets each party is entitled to, and then looking to the balance sheet and working out a division and allocation of the net assets to each party in the proportions representing their assessed entitlements. The outcome is required to produce a just and equitable result.

This methodology applies to not only marriage cases, but also to all de facto relationships where separation occurred after 1 March 2009, including both opposite sex and same sex relationships.

As you can see, a lot of value judgments have to be made, and disagreement is quite common. It is recommended that good advice be sought and accepted, as having an unrealistic expectation of what you might be entitled to receive can commonly lead to agreement not being achieved, and ultimately disappointment.

For assistance with Family Law matters, phone Dominic Wilson, Managing Partner of Craddock Murray Neumann, on (02) 82684000. We have Family Lawyers who are certified by the Law Society of New South Wales as Accredited Specialists in Family Law.


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