Property settlements are among the most important steps in separation or divorce, and will require both parties to seriously consider their future financial situation.
While the two parties have the ability to reach a settlement themselves, it's important to note that couples can apply to the courts to receive orders that outline exactly how a couple's property will be divided.
In a property settlement, there are four steps that will need to be followed in order to reach a satisfactory outcome. These are:
1) Ascertaining the asset pool
The first step in a property settlement is to ascertain a couple's asset pool and determine what property will be included. Any liabilities that are owned by the couple will also be included and divided through subsequent property settlement.
There are some assets that won't form part of this pool – for example, if they were acquired prior to the relationship starting. However, assets that have been accumulated during the course of the relationship, including inheritances, gifts and superannuation, may all be included here.
2) Identify each party's contributions
Once the asset pool has been determined, the parties respective contributions will need to be assessed. This will often depend on what both parties earn and whether they have been responsible for a certain contribution to the shared assets.
The courts will also consider non-financial contributions, such as if one party was a primary caregiver for children.
3) Identify needs
Once the contributions are assessed, the courts will then consider the parties' respective needs and ability to meet those needs, taking into account each party's earning capacity or any parenting commitments. Among the other numerous factors that the courts will consider are:
- the age and state of health of each party;
- a standard of living each party may reasonably expect to enjoy following separation;
- the duration of the relationship;
- When applying the relevant factors to each particular matter, the Court has a wide discretion as to what weight to give to each of those considerations.
4) Practical effect
The final step of a property settlement is to consider the practical effect of the proposed settlement. This involves reaching a distribution that is just and equitable for both parties and may involve some final adjustments to the division of assets.
Achieving a fair distribution of assets after the breakdown of a relationship can be a difficult process. That's why it is important for individuals to consult with a family lawyer who can assist with navigating them through the property settlement process.