5 Common misconceptions about Family Law and Divorce Property Settlements

Monday, 2 September, 2019

So often, when a marriage or de facto relationship ends, there are things that seem unfair on one party. And, to you, your family and friends, it seems only logical that these things should be accounted for, and rectified, in the wash-up of a financial settlement.

Sadly, that is seldom the reality.

Family Law is a very grey and discretionary beast. More often than not, what FEELS as though it should be relevant, is not given any consideration in terms of the Family Law Act.

Read: Divorce isn't fair ... and nor is a black dog's bum

Divorce isn't fair and nor is a black dogs bum

Let's look at some common myths and misconceptions.

MISCONCEPTION 1: You will be reimbursed if your ex spends money post-separation

If one party holds the cash or assets, they do have an advantage. Maintaining control until settlement takes place enables them to more easily fund the process, and to spend on maintaining their lifestyle and ongoing living expenses.

Cash can be easily wasted. If one party has all of the assets or cash in their name, assets can be converted and the funds can be whittled away. Major assets like the sale of a house are more likely to be held in check, but selling a few shares or winding down the bank account often slips under the radar. Seeking to trace the expenditure and recover the money can be an expensive exercise and take time. Further to that, whether or not it is added back into the pot it is only ever really tested at trial (the trial you pay tens of thousands of dollars for), and less than 5% of Australian couples ever get to trial. So, in most cases, it is unlikely you will successfully recover your share of the money your ex-partner has spent since separation and before a settlement is finalised.

MISCONCEPTION 2: Assets for the split in a property settlement are calculated at the date of separation

The value of cash and assets is not calculated at the time of separation, but rather at the time of settlement itself. So, if you are looking at a financial settlement in two years’ time at Court, generally, that is the time that values for your property are assessed. That said, it is advisable to get an indication of the asset and liability values at the time of separation, as under exceptional circumstances, a significant increase, or decrease in value may be taken into account.

MISCONCEPTION 3: Superannuation is excluded from the asset pool

It hasn’t always been the case, but superannuation is now considered property and can be dealt with in a financial settlement. It is considered separately to your liquid assets as it cannot be assigned to one or other party as cash.

However, Superannuation can be split from one party’s superannuation interest to another, to ensure that a ‘just and equitable’ division of property can occur. The legislation was changed largely to compensate separating parents who would be worse off financially than their spouse for having taken time out of the workforce to care for children, and were therefore unable to contribute to their own superannuation fund during that time.

Note: At the time of writing, there is an indication that the law in Western Australia will be changed to bring WA in line with all other states to allow separated de facto couples to split their superannuation but it has not yet been legislated.

MISCONCEPTION 4: Inheritances or money gifted from family are excluded from the asset pool

This is not often the case unless there is a pre-existing and documented agreement in place.

The timing of when the inheritance or gift was received will be important, as well as any intention that the gift is to be repaid to your family. Money given to a child by their parent is likely to be considered a gift, unless there is a written and signed loan agreement in place which details the amount, the purpose of and the repayment schedule of the funds.

MISCONCEPTION 5: You can't do a property settlement until you are divorced

In fact, you can have a property settlement at any point after you have separated, including when you remain living separately under the same roof.

There is some merit in attending to your property settlement as soon after separation as it is practical to do so because the sooner you do, the less exposed you will be to post-separation debt incurred by your former partner. And, any upsurge in your income, inheritance is protected from your former partner. You are also free to acquire assets post-separation to which your former partner will not have any claim.

If you have decided to end your relationship, you should start to educate yourself. I know the overwhelming feelings of making these decisions and facing your new realities. My book, The First Steps through Separation and Divorce will guide you through the emotional and practical aspects you may need to address in the coming weeks, months and years.

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