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What’s up for Grabs: Property splits in separations

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Before you even start to work out what percentage of a property you’re entitled to in a divorce, you have to work out what is even ‘up for grabs’. Here’s how to understand that first step, as explained by expert Prue Hawkes, Senior Family Lawyer of Doolan Wagner Family Lawyers.


When people think about a property settlement after separation the focus is often on entitlements or percentages. While this is an important aspect, the first step is to determine “what’s up for grabs”- or in other words, what property makes up the asset pool.

Some of the common concerns we’ve heard are things like, “all the property is in his name” or, “we always had separate bank accounts”.  While that may be relevant in considering entitlements or contributions, it is not relevant when determining what the net asset pool is.

Property in a relationship

The Family Law Act makes it clear that property in a relationship is anything that either party is entitled to.

This is a much broader term than many realise. “Property” for the purposes of a Family Law settlement can mean;

  • Property owned in joint names
  • Property acquired during the relationship
  • Anything the parties have a present entitlement to when finalising a property settlement or when the matter goes to hearing

Everyone involved in family law proceedings is obliged to provide full and frank disclosure about their financial position, which is one reason why it’s important then to understand the full extent of that little word, “property”.

When assets cause confusion

In our experience, two assets often cause confusion in family law property matters:

  • Inheritances
  • Interests in trusts

Inheritance

  • Often an inheritance is gifted to only one party to the relationship. Sometimes this occurs after the parties have separated but before financial settlement has occurred
  • The timing of the acquisition of the asset does not preclude its inclusion in the net asset pool, nor your duty to disclose it
  • How the inheritance is dealt with is a matter for the parties to determine, or the courts if need be.  It can be set to one side and dealt with in a vacuum or it can be dealt with as part of the whole asset pool with the contribution being reflected accordingly

In a recent case the court has confirmed that an inheritance does not fall into a protected category just because it is an inheritance.  However, although it will be included in the pool of assets it is likely to be treated as an entitlement for the person who was bequeathed the inheritance.  Where an inheritance is received it is important to record how the property was introduced to the relationship, that is, which party of the relationship received the inheritance.

Trusts

Trusts are routinely set up for managing family finances or company interests or for legitimate tax planning arrangements.  Where a party to the relationship is also a beneficiary, trustee and / or appointor to a Trust it can sometimes be difficult to determine whether the assets held by the Trust are also assets of the relationship.

The Family Law Rules have specific guidelines for disclosure in relation to Trusts.  The best rule of thumb is that if you have any direct or indirect control or benefit over and or in the trust it needs to be disclosed.

Where an interest is held in a Trust or a share is held in a corporation it will be important to disclose the details of that interest.  While the asset might be held by another entity, the court is quick to identify property that is held by a Trust or company, but for the benefit of a party to the proceedings.

Overall, determining the net asset pool is only the beginning of the story.  Questions of contributions, both financial and non-financial, future needs and entitlements will then need to be considered to determine what a “just and equitable” alteration settlement might be.


Lisa Wagner, Principal of Doolan Wagner Family Lawyers, is an Accredited Family Law Specialist, a Family Dispute Resolution Practitioner and a Collaborative Family Lawyer. Lisa and her colleague, Prue Hawkes have been successfully helping people with their separation and divorce for many years. You can find them in then NSM Directory and they are located in St Leonards. To find out more, head to their website.

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