In a de facto or divorce financial settlement, why is it important to understand the property and assets of a marriage?
Property settlement is a crucial part of the family law process as it finalises the financial relationship between the parties. The outcome of a property settlement often determines the long-term living standards of both parties after settlement.
As a first step, parties must know what property and assets belong to the marriage or de facto relationship. This is known as the property pool. Anything in the property pool is potentially able to be divided.
What is the meaning of property in Australian family law?
Many people tend to think that property isreal estate. But in a de facto or divorce financial settlement, property has a much broader definition. Any assets and debts can be considered property.
In family law, property is the common terminology for all assets. But that doesn’t mean that all property forms part of the property pool. There’s a legal process to work it out.
In Australia, what forms part of the property pool?
In a de facto or divorce financial settlement, the property pool can include anything acquired during the relationship, including:
- Bank accounts
- Shares and other investments
- Real estate, including the marital home and any investment properties
- Windfalls such as lottery winnings and inheritances
- Partnership or business assets
- Personal property
It’s important to understand that the property pool can also include debts and other liabilities. Just as assets can be divided, so too can debts (such as credit card debt and mortgages).
The basic rule: if it’s a shared obligation, it’s got the potential to be divided in a de facto or divorce settlement.
Does pre-relationship property form part of the property pool?
Sometimes, the property pool can include property that was acquired by one of the parties before they entered into the relationship. This property is sometimes known as pre-marital property.
Whether the pre-relationship property falls into the property pool (and is eligible to be divided) will depend on the circumstances, including:
- Whether the other party made a meaningful contribution to the asset (for example, assisting with mortgage repayments)
- Whether the marriage or relationship was short-term. (There’s no fixed definition of a short-term relationship when it comes to the property pool)
- Whether the property was kept separate from the relationship’s other property
What happens to property acquired after separation?
Any property acquired after separation may be considered a post-separation contribution. If this is the case, the property will go into the property pool.
What is considered a post-separation contribution depends on many things, including:
- Whether the property improves the financial position of either party
- Whether acquiring the property is in the best interests of the children
- The age of the parties and whether they’re in good health
- Whether each party is capable of earning a reasonable income
- The level of care that either party must provide to their children
- Whether both parties enjoy a reasonable living standard
Working out post-separation contributions can be complicated and technical, with many legalities. If you’re considering acquiring property before finalising your financial settlement, or if you’re concerned about your former partner’s property, you’ll need legal advice as soon as possible. We’re experts in divorce financial settlements. We’ll help you through. Get in touch to find out more.