How are assets split in the event of a relationship breakdown?

Date: May 31, 2011

If a couple decides to separate or divorce, their net assets must be divided and allocated so that nothing is left in joint names.

But many people - until they seek advice from an experienced family lawyer - do not understand how assets are split or financial settlements are reached.

One common misconception is that a financial settlement entitles each party to a "wish list", in which they set out what assets they would like to take after a relationship breaks down.

In reality, this is not the case - each party is entitled to receive a percentage of the existing assets. To this end, a four-step methodology is applied to determine how these should be divided among the former couple.

This system is used in the event of any relationship breakdown - including a marriage, de facto relationship or same-sex union - where the separation occurred after March 1st 2009.

First, a family balance sheet of assets and liabilities is drawn up, which identifies and places a value of all the assets and liabilities - such as personal debts - from the relationship. Assets are assessed regardless of whose name they are held in and the Family Law Act requires full disclosure of each party's financial situation.

The second step assesses each party's contributions - either made personally or on their behalf - during the relationship. These include financial and non-financial contributions - including those made by parents and homemakers.

These assessments are subjective and made on a case-by-case basis - a family lawyer can help with this process.

Next, it needs to be determined if any party should be entitled to an additional percentage of the relationship's net assets - and if so, what this should be.

Finally, contributions and any additional entitlement are considered to determine the percentage of the net assets each partner is entitled to. The balance sheet is then used to divide and allocate the couple's joint assets proportionally, based on the overall percentage determined for each party.

Unsurprisingly, disagreements at this stage are quite common, as a number of value judgements must be made and one - or both - parties may not feel they are getting a fair deal.

An experienced family lawyer can provide excellent advice - and outline realistic expectations - for divorce settlements, which can help to avoid disappointment.

By seeking - and accepting - advice from a family law expert, you can work towards a better resolution and avoid further disputes about the division of assets.