‘Just and Equitable’
Under Australian family law, the division of property assets must be “just and equitable”.
When parents come into property mediation they tell me they just want a fair outcome. They usually want to know they can move forward financially secure, support their children and give them a good standard of living.
If parents go to court, the court considers a range of factors when determining what constitutes a fair and equitable division of property.
These factors include the financial contributions, the non-financial contributions, and the future needs of each parent. This process is known as the 4 Step Process.
Four Step Process:
Work out the Property Pool: Identify and value the assets, liabilities and resources of the parties.
Consider the contributions of the parties made throughout the relationship, both financial and non-financial.
Consider the future needs of each party.
Determine whether the proposed settlement is just and equitable.
Step 1.
Step 1 of the Four Step Process is to identify and value all of the assets, liabilities and resources of the parents. This forms the “property pool” that is available for division.
Assets can include tangible property such as real estate, vehicles, furniture, boats, antiques or intangible property such as the good will of a business.
Liabilities can include the outstanding mortgage on the family home, credit card debt or finance owed on a vehicle.
Resources can include property with actual or anticipated value such as royalties, a beneficial interest in a trust or an anticipated inheritance.
Having a “Full and frank financial disclosure” assists the parents to vouch and value the assets, liabilities and resources that form the complete property pool. If a particular value cannot be agreed, it is common for the parent to appoint a qualified valuer to produce independent evidence attesting to a value.
Step 2.
One of the primary factors that a court will consider when dividing property assets is the financial contributions made by each party.
This includes direct financial contributions such as income earned, property owned, and assets purchased.
It also includes indirect financial contributions such as gifts or inheritances received and financial support provided to the other party, for example if they were supported during a period of study which has enhanced their future earning capacity.
Where one party has made a significant financial contribution, they may be entitled to a larger share of the property assets.
For example, if one party has made a large initial contribution to a property brought into the relationship, they may be entitled to a greater share of the property assets.
Non-financial contributions are also considered when dividing property assets.
This includes the contributions made by each parent in caring for the family, raising children, supporting the career of the other parent and maintaining the home.
Non-financial contributions are particularly relevant in cases where one parent has given up their career to care for the family or where one party has made significant contributions to the household but has not earned an income or earned a smaller income.
In these cases, the court may award a greater share of the property assets to the parent who has made significant non-financial contributions.
However, it is often the case in households where one parent worked or earned more than the other, one was in charge of home duties and parenting; the financial and non-financial contributions are likely to be assessed as equal.
Step 3. Consider the future needs of each parent. Factors which help determine the future needs of both parents are: the duration of the relationship; the age and health of both parents; income and earning capacity; care of children (including any special needs children). There is no set formula to work out how much a future need can determine the outcome.
Step 4. “The court shall not make an order … unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.” This is an opportunity to sit back and look at the whole picture and see if it seems fair and reasonable to both parents. Once everything is laid out and proposals are made, parents can then seek legal advice to get the view of how the courts may rule in their circumstances.
To achieve an agreement it is essential that there is open honest communication between parents. This is where mediation can support parents to work through the property process and facilitate communication to help parents to resolve disputes more effectively. When parents get ‘stuck’ and are unable to come to an agreement, they can engage a qualified family lawyer to come to the mediation in a process called legally assisted mediation. A family lawyer can provide on the spot advice during the mediation help parents come to an agreement.
