How to Split Assets During Divorce: What You Need To Know
Splitting assets during a divorce can be challenging, but don't worry! Get the help you need with our expert tips and advice. Find out what documents to prepare, strategies for asset division, and more from our expert divorce lawyers.
Splitting assets during a divorce can be a difficult and complex process. There are many factors that need to be considered, and it can be helpful to have an experienced lawyer by your side to help guide you through the process. At State Law Group, we have helped countless clients navigate the complicated waters of property settlement during a divorce. In this blog post, we will provide an overview of how assets are typically split in a divorce, as well as some tips on how to make the process go as smoothly as possible.
1. Understand what is happening
How the Family Law Act defines the grounds for divorce
In 1975, the Family Law Act introduced a significant change to Australian Law with the concept of "no-fault divorce". This meant that the court did not have to hear the reasons why a marriage had broken down, only that the relationship had been continuously strained for at least 12 months and that there was no possibility of reconciliation. This new approach brought relief to couples seeking divorce, allowing them to move on from an unhealthy and unhappy marriage without blame or fault. The focus now was on promoting healing and starting anew, rather than assigning blame or guilt.
The second aspect of the "divorce test" acknowledges that once trust and love have eroded in a relationship, our legal system must respect the right of each individual to determine their future. Essentially, if one spouse has initiated the divorce proceedings indicating they don't want to continue the marriage, the court will not interfere as long as the separation is confirmed.
The grounds around separation
The concept of separation is a crucial factor in obtaining a divorce, according to the Family Law Act. However, defining separation can be complex and subjective, especially when relationships are on-and-off. The Act considers situations where couples separate and then get back together for three months or less, and allows those periods of separation to be combined into one period.
For example, if a couple separates for two months, reconciles for three, and then separates for ten, the total separation period adds up to fifteen months and satisfies the twelve-month requirement.
The basics of divorce - how to split assets
When it comes to dividing assets between you and your former partner, there are two potential pathways:
- Agreeing on your own terms, which can be formalised with either a Consent Order from the Family Court or a Binding Financial Agreement.
- Seeking resolution through court-mandated financial orders if you cannot come to an agreement yourselves. These include property division and spousal maintenance payments.
What is a Consent Order in a divorce?
A Consent Order is a legally binding document that defines the agreement between two parties in a divorce, including how their assets will be divided. It is usually entered into voluntarily by both parties and approved by the court, although it can also be imposed almost unilaterally on one party if they do not accept the other's proposed terms.
The Family Court provides an online tool to assist filing consent orders by yourself, as well as free legal advice from a lawyer or a family dispute resolution practitioner (FDR). It is important to note that if either party decides to seek further financial orders outside of the Consent Order, the agreement may no longer be valid.
What is a Binding Financial Agreement?
The other document is a legal document which is available at the end or in between marriages. These financial documents specify what assets must be divided between two people. Normally, a court will never overrule such conditions without a special event. You will require an experienced lawyer if you want to make a financial agreement with them.
2. Consider all financial and non-financial resources
During a divorce, many couples may be surprised that both individual and joint assets accumulated throughout the relationship, as well as liabilities, are taken into account. The laws regarding this can differ between states in Australia, but it is important to consider all assets such as:
Financial contributions made by each spouse in the marriage should be taken into consideration. This includes financial resources saved during the marriage, gifts, inheritances, payments made by one spouse towards another’s personal debts, as well as any investments or inheritances that either partner has received.
Superannuation is also a form of asset that needs to be taken into account in a divorce. In Australia, superannuation can only be split by court order or with a binding financial agreement from both parties. It's important to remember that the balance of your superannuation will need to be divided according to equitable sharing principles; meaning that each party will receive an equal share of the asset.
Superannuation benefits can also be included unless one party has superannuation overseas. If this is the case, it is considered a financial resource. In most cases, superannuation is considered separately from the general pool of assets.
The family home
The family home is often the most valuable asset that a couple owns, and it is usually the biggest source of contention in a divorce. In Australia, the family home is generally divided between the parties based on who has the greater financial need for it. For example, if one party has primary custody of the children, they may be awarded the family home.
Other real estate assets
In addition to the family home, other real estate assets may also be considered in a divorce. These assets can include investment properties, holiday homes, and rental properties. The division of these assets will usually be based on who owns them and what their financial need for them is.
If either party owns a business, that business will generally be considered an asset in the divorce. The value of the business will be determined by appraisers, and it will then be divided between the parties based on who has the greater financial need for it.
Personal property includes all of the belongings that each party owns, such as furniture, cars, jewellery, art, and clothing. Dividing property is usually done through negotiation between the parties or through mediation. If the parties cannot agree on how to divide their personal property, a judge may make the decision for them.
It is also important to consider any debts that are in the name of either party. These can include credit cards, medical bills, student loans, and mortgages. The division of these debts will usually be based on who owns them.
By understanding the different types of assets that may be considered in a divorce, you can ensure that your interests are protected and that you come away with a fair share of the asset pool. When it comes to asset division in divorce situations, it's important to seek legal advice with an experienced family lawyer who can advise you on how best to protect your financial interests
3. How are assets divided during a property settlement?
In Australia, splitting assets in a divorce is done through a process known as "property settlement". This involves the negotiation of financial arrangements between the two parties involved in a marriage or de facto relationship. During this process, all assets and liabilities are taken into consideration to determine how these will be divided between them.
While the Family Law Act mandates a fair and just division of assets, this does not necessarily mean a 50/50 split. Factors such as initial assets, earnings, health, and age may all play a role in determining a fair division of assets. It's important to work with a trusted legal professional to navigate the legal processes and ensure your rights and interests are protected.
Step 1: Make a list of assets
Generally, all assets acquired during the marriage are considered to be marital property and subject to division. Make an exhaustive asset pool list of all the assets that you and your spouse own together or separately. This should include both tangible items such as cars or houses, as well as intangible property such as investments or stocks.
Step 2: Value your assets
The next step is to get a valuation appraisal of each asset in your asset pool. This should be done by a qualified valuer with experience in family law valuations. A divorce lawyer will be able to refer you to a suitable expert if required.
Step 3: Consider contributions
Now we assess the contributions each party has made to the relationship. This includes direct financial contributions such as wages, bonuses and proceeds of investments, indirect financial contributions such as inheritances or gifts, negative financial contributions such as financial losses due to excessive gambling or substance abuse, and non-financial contributions such as domestic duties, raising children or undertaking renovations. Generally, the longer the parties have been in the relationship, the less relevant the assets owned by each party prior to the relationship becomes.
Step 4: Calculate future needs
Calculate the "future needs" of the parties. This involves taking into account a range of factors such as age, health, income and earning capacity, care and financial support of children, financial circumstances of any new relationship, and financial resources of each party. The court will consider if any adjustments should be made to the asset pool in regard to both parties’ future needs.
Step 5: Negotiate an agreement
After gathering all the relevant information regarding asset valuation and outlining each party's financial needs and goals for post-divorce life, it is time for negotiation between both parties towards reaching an equitable outcome for both spouses. The parties involved in the divorce may negotiate a settlement agreement themselves or they may choose to have their lawyers represent them to mediate a fair division of assets based on the facts of their case.
Step 6: Finalise your settlement agreement
Once an agreement has been reached between both parties, it must be drafted into your final settlement agreement which is then signed off by both parties before being filed with the court for official approval. A divorce lawyer can ensure that all terms outlined in your settlement agreement meet the requirements of Australian family law and are legally binding upon both parties once filed with the court.
4. Common pitfalls to avoid when splitting assets in divorce
By being aware of the common pitfalls associated with splitting your asset pool in divorce, you can be better prepared and have a smoother process when dividing assets.
Not hiring a lawyer
One of the biggest mistakes that people make when going through a divorce is not hiring a lawyer. Splitting assets can be a complex process, and it is important to have someone on your side who understands the law and can help to protect your interests.
Not getting a valuation
Another mistake that people make is not getting a valuation of their asset pool. This is especially important if you have a lot of assets, such as property or investments. A professional valuation will ensure that you are getting a fair split of the assets.
Not considering tax implications
Another thing to consider when splitting assets in divorce is the tax implications. Certain assets, such as property or retirement accounts, may be subject to taxes. It is important to speak with a tax advisor to ensure that you are taking all of the necessary tax implications into consideration.
Not getting a prenuptial agreement
Another common mistake is not getting a prenuptial agreement before getting married. A prenuptial agreement is a legal document that outlines how assets will be divided in the event of a divorce. If you do not have a prenuptial agreement, then your assets will be subject to state laws, which may not be fair or equitable.
Not updating your will
If you have a will, it is important to update it after your divorce is final. This will ensure that your assets are distributed according to your wishes in the event of your death. If you do not update your will, there is a possibility that your ex-spouse could inherit your assets, which may not be what you want.
Not taking emotions into consideration
It is also important to try to take emotions out of the equation when splitting assets in divorce. This can be difficult, but it is important to remember that this is a business transaction and that each person should try to get what they feel is fair.
If you were married, there is a 12 month deadline to submit applications for property adjustment after your divorce is declared final. If your relationship was in a de facto situation, then the time restriction to make such applications would be two years from when that union ended. If you miss your deadline, obtaining an extension from the court may be necessary; however, these requests are not always granted. It is important to speak with a lawyer as soon as possible after your divorce or de facto relationship ends in order to ensure that you do not miss any critical deadlines.
5. How to negotiate with your ex-spouse over division of assets
It’s important to remember that asset and property division should not be seen as a form of ‘punishment’ or reward. Rather, it is an economic activity which involves restructuring the financial relationship between two parties. To ensure both parties come away with a satisfactory result, it’s important they negotiate fairly and sensibly. Consider what assets are practical for each person based on their individual circumstances, taking into account factors such as earning potential, age and any children involved in the divorce.
Keep the lines of communication open
It’s important to keep the lines of communication open with your ex-partner during a divorce settlement. This means being respectful and civil when you communicate, and being willing to listen to their point of view. It’s also important to be clear about what you want and what you’re willing to compromise on.
Put your children first.
If you have children, it’s important to put their needs first during a divorce settlement. This means making decisions that are in their best interests, and not letting your personal feelings get in the way. It’s also important to try and maintain some semblance of stability for their sake, even if things are difficult between you and your ex-partner.
Be prepared to negotiate
You should be prepared to negotiate when it comes to settling your divorce and dividing up assets. This means being willing to give and take, and being open to finding creative solutions that work for both parties. It’s also important to have a clear idea of what you want, and what you’re willing to accept before you start negotiating.
Be prepared to compromise.
Divorce settlements often require both parties to compromise on certain issues in order to reach an agreement. For example, you may need to give up your claim to the family home in exchange for a greater share of the retirement savings. It is important to be prepared to make some concessions in order to reach a fair settlement.
Don’t be afraid to ask for help.
If you’re having trouble communicating with your ex-partner or reaching a settlement, don’t be afraid to ask for help from a mediator or lawyer. They can help facilitate communication and provide guidance on the best way to move forward.
6. Common mistakes to avoid when choosing a divorce lawyer
Not checking for experience
It’s important to ensure that your lawyer is experienced in family law, and has the relevant qualifications to practice. Ask your lawyer about their experience with divorce settlements and how many cases they have settled successfully.
Waiting too long to hire a lawyer
If you wait too long to hire a lawyer, it could be difficult to find one who is available or interested in taking on your case. Furthermore, the longer you wait to start the process, the more time is wasted and the more expensive the divorce process becomes.
Not being honest
It is important to be honest with your divorce lawyer about all aspects of your marriage, even if it is difficult to discuss. Your lawyer cannot help you if they do not have all the information. This includes being honest about any financial problems, infidelity, or other issues that may have contributed to the end of your marriage.
7. Tips on how to find the right divorce lawyer for your property settlement
Do your research
It’s important to do your research and find a lawyer who has experience in handling property settlements. Look for recommendations from friends or family, as well as online reviews.
Schedule a consultation
Once you’ve found a few potential lawyers, it’s important to schedule a consultation. This will give you the chance to find out more about their qualifications and experience, as well as ask any questions you may have. It will also allow them to assess your case in more detail and provide advice on how best to proceed.
Consider what you can afford to spend on legal fees
You should also consider what you can afford to spend on legal fees and make sure that the lawyer you choose is within your budget. Don’t be afraid to ask questions about their fee structure and look for any hidden costs.
Get a written retainer agreement
Finally, make sure to get a written retainer agreement from your lawyer before beginning the process. This document should outline their responsibilities and fees, as well as any other important information you need to know. It should also include an explanation of how they will handle payments and what type of settlement they will be able to negotiate for you.
How State Law Groups expert team of lawyers can help you
At State Law Group, our team of experienced divorce lawyers are committed to helping you get the best outcome possible in your divorce. We understand the legal complexities of divorce and can help you navigate the process with confidence. Our lawyers will work closely with you to ensure that all of your assets are properly divided and that your interests are protected throughout the process.