Can I include my overseas assets in my Will?

In multicultural Australia, it’s common to hold assets overseas as well as in Australia. But have you considered what happens to your overseas assets if you pass away? Does your Australian will cover them or do you need a separate will in each country in which you have assets?

If you make a will in New South Wales, it will cover assets that you own in other parts of Australia. But you can’t assume that any overseas assets you have will be included in your Australian will. Every country has its own rules and laws that apply to your assets when you die.

There are a couple of options available if you have assets in different countries.

An international will

One option is to make an international will. This is made in accordance with the Convention Providing a Uniform Law on the Form of an International Will 1973 (the Convention). A country that is a party to the Convention will recognise a will made in accordance with the requirements of the Convention. Whether an international will is appropriate depends on the country in which the assets are located and whether it is a party to the Convention.

Australians who have made an international will may find it easier to prove the validity of the will in a country which has adopted the Convention. But although the Convention provides uniformity on the formal requirements for a will, it doesn’t address:

  • the local laws which apply;
  • who can apply for probate;
  • where probate can or should be taken;
  • family provision applications (who can make a claim and in which jurisdiction);
  • inheritance rules specific to each country (who can inherit and what they can inherit);
  • tax and estate administration requirements; and
  • revocation of the will.

These things continue to be governed by:

  • where your assets (particularly immovable assets such as land) are situated;
  • the jurisdiction where you make the will;
  • where probate is granted; and
  • where you die or are domiciled.

A separate will in each country

The other option is to make a local will in each of the countries in which you hold assets. This option is usually preferable because:

  • it allows executors in different jurisdictions to apply for probate concurrently and independently of each other. If there is only one will, probate must be obtained in one jurisdiction then re-applied for in the other jurisdictions, which can cause delay;
  • if there is only one will for all property, having probate of the original will granted in one country and then in the others may cause difficulties, because the Court in each country will want to retain the original will.
  • there may also be delays caused by the translation and interpretation of   will made in another country;
  • there may be tax savings and reduced court fees where a particular country is dealing only with property within that country rather than with all of your estate’s assets;
  • administrative difficulties can occur if the original will is held in one country while there are assets in another country which have to be distributed;
  • the probate process can be significantly simplified for your family and executors because the executors have a local legal advisor to guide them through the process and the cultural differences.

When making wills in separate countries, it’s very important to advise each of your lawyers that you either intend to make, or have already made, a will in another country. This is to ensure that your wills don’t contradict each other or that one will doesn’t inadvertently revoke (cancel) another.

An international will may still be appropriate if most of your assets are in Australia with a modest asset (such as a bank account) in a signatory country where a grant of probate is likely to be necessary.

What now?

If you have assets in countries other than Australia, contact us for legal advice as to the best structure for your situation to ensure that your assets are disposed of in accordance with your wishes and that the estate administration process is as cost-effective and streamlined as possible.


Family Law property – what are future needs?

If you have separated from your former partner and cannot reach agreement regarding a division of property, you may end up before a Court considering what property division orders should be made.

Most couples undergoing a separation reach agreement regarding the division of their property and never see the inside of a court room. If you reach agreement, you should ensure that it is formalised, either by:

  1. orders made by consent and issued by the Federal Circuit and Family Court of Australia (FCFCOA); or
  2. signing a binding financial agreement.

Even if you and your former partner reach agreement, it is important to obtain advice about the way in which the FCFCOA determines your property entitlement. This is an important tool in negotiations with your former partner.

If your matter were before the FCFCOA, it is likely to consider:

  1. firstly- what assets and liabilities form the asset pool available for division between you and your former partner;
  2. next – the financial and non-financial contributions made by you and your former partner. The court determines each party’s percentage entitlement to the property pool based on those contributions; then
  3. then – what further adjustment (if any) should be made in favour of you or your former partner based on your “future needs”. The FCFCOA looks to the future and decides whether to make an adjustment based upon any of the matters set out in section 75(2) of the Family Law Act 1975 (FLA).

Future needs factors that may result in an adjustment being made include:

  1. Where one party is of advanced years or suffers from some long term or permanent health condition; and
  2. Where one party has the ongoing or primary care of children of the relationship; and
  3. Where one party has a greater future earning capacity.

Evidence which may be relevant to “future needs” factors includes:

  1. Age and state of health of parties.

Possible considerations:-

  1. If one party is nearing retirement age, are they likely to retire in the near future or continue working?
  2. What is the nature and severity of any illness suffered by a party and is that illness long term or likely to be remedied (if so within what kind of period);
  3. Does an illness or health condition of one party effect their ability to care for the children or to earn income?
  • Care and control of children of the relationship under 18 years of age.

Possible considerations:-

  1. for the party with whom the children live:
    • The number and ages of the children and the number of years before they turn 18;
    • the amount of supervision the children require;
    • How care of the children effects the lifestyle/recreation time of that party and their ability to work;
    • The extent to which child support paid contributes towards the children’s expenses.
  2. for the party with whom the children spend time:
    • The amount of time the children spend with that party and the extent to which that relieves the other party of the burden of caring for children or allows them freedom of lifestyle/recreation and to be gainfully employed;
    • The number and ages of the children and the number of years before they turn 18;
    • Whether child support has been paid and the history of payments, including the likelihood of payments continuing in the future;
    • The level of child support payments.
  • Earning capacity.

Possible considerations:-

  1. the earning capacity of the parties during the relationship;
  2. Whether one party’s earning capacity has been affected by the relationship (whether due to caring for children or otherwise);
  3. each party’s current income and potential earning capacity;
  4. If one party is not working or is not working full time, their capacity to obtain employment or other employment and their expected remuneration in that employment;
  5. training or further qualifications a party may need to complete to obtain employment;
  6. the likelihood of a party receiving or retaining an income producing asset as part of the property settlement;
  7. The size of the property pool to be divided between the parties relative to each party’s income and earning capacity.

What Now?

Contact us for advice and support in resolving your family law issues.


Family Law property – contributions

In a property settlement, the first step of the four-step process in determining a split of the assets of a marriage or de-facto

In a property settlement, the first step of the four-step process in determining a split of the assets of a marriage or de-facto relationship is identification of the asset pool. The next step is assessment of the contributions of the parties to the asset pool, which is achieved by applying sections 79 or 90SM of the Family Law Act 1975 (Cth) (“the Act”).

The percentage split of the property pool is affected by assessment of the extent of each parties’ contributions. Greater contributions by a party may increase that party’s entitlement.

The Court takes into account different types of contributions.

Financial contributions

These are contributions by or on behalf of a party to the relationship, or a child of the relationship, to the acquisition, conservation or improvement of the parties’ property.

They include significant assets or superannuation brought into the relationship at the start of the relationship, or the contributions of salary, superannuation or other earnings generated during the relationship.

Non-financial contributions

These are contributions by or on behalf of a party to the relationship, or a child of the relationship, which may not have a “price-tag”, to the acquisition, conservation or improvement of the parties’ property.

They include home improvement or renovations undertaken by a party which improve the value of the matrimonial or investment home.

Homemaker or parenting contributions

These are contributions by a party to the welfare of the parties to the relationship (including any children) as a homemaker or parent.

They include parenting duties, cleaning duties and general house maintenance duties. The weight given to these contributions is on par with financial and non-financial contributions.

Weight attached to contributions

The Court takes into account when in a relationship contributions were made. Progressively less weight attaches to initial contributions over time. Contributions made by a party at the beginning of a relationship bear greater weight in a short relationship than they do in a long relationship. A party who contributes the majority of the asset at the start of a short relationships has grounds to leave the relationship with most of those assets, which is a less likely outcome in a longer relationship.

Specific types of contributions

Specific types of contributions may also be relevant to certain assets. For example, one partner caring for an injured partner may be a relevant contribution in determining the entitlement (if any) of the uninjured partner to the injured partner’s personal injury compensation payment.

A gift by third parties to a party to the relationship may also be a classified as a contribution. These contributions (often from parents) include monetary gifts, assistance with home purchases, or a gift of household furnishings.

What now?

Above is a brief overview of contributions-related factors which may be considered by a court in property proceedings. This is a complex area of law and it is important to get advice from an experienced family lawyer. Contact us for advice specific to your circumstances or if you have any questions about contributions in family law property settlements.


Identification and valuation of assets in family law property settlements

The breakdown of a marriage or de facto relationship can be incredibly stressful. Both parties want to achieve the best possible outcome for themselves. Consequently, dividing assets can be a difficult process.

However, receiving legal advice about your available options should help to minimise your emotional and financial stress. In this article, we cover what assets are included in the asset pool and how they are valued and divided.

What Assets are Included in the Asset Pool?

The asset pool is the total net value of all matrimonial assets. This includes assets, liabilities and superannuation interests:-

  • in the name of both parties;
  • in the name of either party; and
  • under the control of one party.

Identifying `matrimonial’ or `relationship’ assets available for distribution between If you and your ex-spouse or de facto partner is an important and sometimes complex step in a property settlement. If you and your ex cannot agree which are matrimonial or relationship assets, the court may have to decide.

The court’s usual approach is to value the matrimonial/relationship assets as at the date of trial (not at the time of separation). The time of Trial may be up to 2 years after the commencement of proceedings. Between the dates of separation and the trial, the value of assets may have significantly risen or fallen. The court will consider any changes in value and, if appropriate, attribute such changes as being a contribution by a party. Depending on whether such change is positive or negative, it may increase or decrease that party’s overall entitlement.

There may be consequences if a party attempts to remove an asset from the pool by disposing of it before settlement. If a party wrongly disposes of an asset after separation, the court will consider the factual circumstances surrounding that disposal. It may decide to notionally “add back” the value of the asset to the matrimonial/relationship assets by treating it as part of the share of the person who dealt with it.. Cases surrounding this complex area of law are regularly developing the law.

A recent study found that the following ‘basic assets’ are usually divided in a settlement. The most common assets and the percentage of cases they were included in are:

  • Furniture – 100%
  • Cars – 95%
  • Bank and credit union accounts – 81%
  • House or unit – 77%
  • Other basic assets – 46%

How are Matrimonial Assets Valued?

Valuation of matrimonial assets, although essential to resolve a family law property settlement, can be contentious. Here’s how the value of many of these items is determined:

Real Property

Land and homes are usually the largest value shared assets. Parties are often able to agree on a value after appraisals from real estate agents. However, it is generally better to get an independent valuation by an expert jointly engaged by both parties, as the value is more precise than an appraisal. This is required by the court if there is a dispute over value.

Business Interests

Parties should jointly instruct an independent expert such as a forensic accountant to carry out a valuation of a business, even if the business has an in-house accountant. In some cases, the value of the business will simply be the value of its assets minus its liabilities. In other cases, it is far more complex.

Motor Vehicles

A jointly appointed expert can be used to ascertain the value of a motor vehicle. If the value of the vehicle isn’t high, a website such as Carsales or Redbook can be used to provide a value range which the parties can use to agree on a price.

Furniture and Jewellery

The court tends to adopt a conservative approach to valuing furniture and jewellery, generally preferring the second-hand value to the insured or replacement value. Independent valuations can be used, but you should consider whether their cost is likely to outstrip the value of the jewellery.

How does the Court Divide the Matrimonial Assets?

If mediation and/or other negotiations fail and a settlement is only achievable by going to court, the court will decide what it believes is ‘just and equitable’ for both parties.

The court will:

  1. Consider the value of the assets after the payment of any liabilities;
  2. Consider the contributions made by each party, including:
    1. Financial contributions;
    1. Non-financial contributions (e.g. repairs to a property or unpaid work in a family business);
    1. Contributions as homemaker;
    1. Contributions as a parent;
  3. Assess the current and future circumstances of the parties referring to a list of factors including:
    1. the age and state of health of each of the parties;
    1. the income earning capacity or disparity between the parties;
    1. the length of the relationship and its effect on each of the parties’ income earning capacities; and
    1. who will be the children’s primary carer in future;
  4. Determine, in the whole of the circumstances and the adjustments made (percentage wise) to the contributions and circumstances of the parties moving forward, whether the division of assets is just and equitable.

The court can apply as much weight to these factors as it considers necessary, so there is no set formula for calculating how much each party will receive.

Couples can often resolve their financial issues outside of court but whether you can negotiate an outcome yourself or require the intervention of the court, you should seek independent legal advice concerning the best approach for your situation and your likely range of entitlement. Contact us to discuss your matter and receive advice on your best course of action.


Superannuation Splitting

The treatment of superannuation in a property settlement between separating couples was historically a problem area for the Family Courts because of the special qualities of superannuation interests. Because of strict rules governing superannuation interests, it has sometimes been difficult to arrive at a settlement which is fair to both parties.

Property settlements dealt with under the Family Law Act can divide superannuation along with other assets as part of property settlement. As most people have superannuation, this has a significant effect on most people’s property settlement.

There are varying approaches on valuing and determining the division of superannuation interests in family law matters. Each case is approached and determined based on its own specific circumstances.

It is important to seek advice concerning the valuation of either your own or your spouse’s superannuation interest before agreeing on a property settlement.

Accumulation Funds

Accumulation funds, also known as industry funds, are the most commonly held superannuation interests. The value of this type of superannuation interest is usually determined by a recent member statement or a completed superannuation information form.

Self-Managed super funds

Self-managed super funds are becoming more common, particularly as a way to invest in property. However, unlike other types of superannuation, the diverse nature of the self-managed superfunds and the property they own, make a standard valuation regime impossible. An expert is generally required to value a self-managed super fund.

Defined Benefit Funds

To value a defined benefit superannuation fund, you will need to send a Form 6 or a Superannuation Information Request Form to the specific fund. Information provided by the fund regarding a superannuation interest may have to be valued by an Actuary to determine its value for family law purposes. Defined Benefit valuation formulas are usually based on a combination of factors including:

  • The age of a member;
  • A member’s average salary leading up to retirement or the value of the super at retirement; and
  • How long a member has worked for the employer.

How do you split superannuation?

Superannuation interests are split by a splitting order or agreement, usually contained within Court Orders (made by consent or after litigation) or a Binding Financial Agreement (BFA).

After the Orders or BFA are served on the Trustee of the superannuation fund, the Trustee will arrange for a payment from the member spouse’s superannuation interest to a super fund nominated by the non-member spouse. The payment may be expressed as a specific amount or as a percentage of the member spouse’s interest.

A superannuation split cannot be converted to cash. The non-member spouse is not able to access the superannuation they receive until retirement or hardship.

Contact us today for help with valuing superannuation interests and your potential entitlements.


Estate Planning and Life Insurance

The purpose of life insurance is to provide a cash payment for your loved ones in the event you unexpectedly pass away. The policy may also provide a payment if you are permanently disabled or suffer a critical illness. The payment can be used to support your spouse and children or to pay down debts. It can also be used to meet your tax obligations, to give a beneficiary cash in lieu of other assets, or for a donation to charity.

You can hold your life insurance through a policy taken out personally or through your super fund.

It is important to consider who will receive the proceeds from your life insurance policy and how to minimise taxes and other claims on the cash.

Who will receive the proceeds from your policy?

There are some traps, which could mean the difference between the money going directly to your family, or being used to pay outstanding debts and obligations.

Holding the policy in your own name.

If you are the owner of the policy, the proceeds will go to your Estate and be dealt with in accordance with your Will. If you do not specify in your Will who is to receive the life insurance proceeds, they will form part of your “residual Estate” and be paid to your residual beneficiaries.

If you have outstanding debts or other claims against you when you pass away then your Estate assets (including the proceeds from the policy) may be used to pay these debts and obligations, which may result in your dependents missing out.

A person may challenge it your Will if they consider that it does not adequately provide for them. If the challenge succeeds, they may take a larger portion of the insurance proceeds than you intended.

Naming a beneficiary to receive the proceeds.

If instead you name a beneficiary under the policy, the proceeds will not be paid to your Estate: they will go directly to the named beneficiary who will receive the proceeds outright after your passing.

If a beneficiary has unsatisfied debts or liabilities, the proceeds may be used to satisfy those claims. If the beneficiary is a child, they will be entitled to the full amount of those proceeds when they reach 18, which could be too early for them to properly handle the money.

Consider using a ‘testamentary trust’ in your Will.

If you want the proceeds from life insurance paid to your Estate, you should consider including a testamentary trust in your Will to ensure that your objectives for your life insurance are met. A testamentary trust will:

  1. Ensure that the proceeds are passed to your intended beneficiaries, as and when you direct. For example, you may specify that the proceeds are to be paid to young beneficiaries over time;
  2. give your beneficiaries capital gains and income tax advantages, particularly if they are under 18; and
  3. Provide a significant level of protection for assets in the event a beneficiary becomes bankrupt or divorced.

Insurance through super

If you hold a life insurance policy through your super fund, then your options regarding who receives the proceeds are more restricted and the tax considerations are more complex than if the policy is held outside super.

If your life insurance policy is held through your super fund:

  1. You may nominate either your Estate or a person who qualifies as a “dependent” for superannuation law purposes to receive the super proceeds. If your nomination is not a valid binding nomination, the trustee of the super fund has the authority to overrule your nomination to ensure that your benefits are distributed appropriately; and
  2. if the beneficiary is not also a “dependent” for tax law purposes, (which is a slightly different definition than for superannuation law purposes) there may be an additional layer of tax on the payout to the beneficiary.

Contact us to ensure that your life insurance ties in with your estate planning and that your dependents are properly looked after as you intend.


Tax and Family Law Property Settlements

An important but often overlooked aspect of family law property settlements is the tax and duty consequences of parties retaining or disposing of assets. It is essential that all parties receive financial and tax advice before finalising a property settlement to ensure that everyone walks away with what they intended and to avoid nasty surprises later.

Generally, the biggest tax issues in family law matters are:

  • Capital gains tax;
  • Stamp duty;
  • Income tax consequences – “deemed dividends”; and
  • GST.

Capital gains tax (CGT)

CGT is payable on the net capital gain made on the sale, transfer or disposal of property. This includes real estate (other than the family home), shares, leases and different types of rights.

Generally, the following is exempt from CGT:

  • Assets acquired before 20 September 1985;
  • Collectables less than $500;
  • Some personal assets less than $10,000;
  • Cars and motor vehicles;
  • Sale of a small business or business asset;
  • Assets used to produce income; and
  • The parties’ main residence.

CGT and the family home

If you keep the main residence (or family home) selling it later, the sale is exempt from CGT on the profits.

CGT and investment properties

If you have and keep an investment property, the transfer from your former partner to you is not subject to CGT. You must have a certain written agreement or Court order to obtain marriage or relationship “rollover relief”. If you later sell the investment property, you will have to pay CGT on any profit.

Rollover relief on assets from a company or trust

Rollover relief can also apply to assets transferred from a company or trust to a party of the marriage or relationship. But be wary of Division 7A of the Income Tax Assessment Act 1936 (ITAA) [see below].

Capital losses

Capital losses (when what you receive from the sale, transfer or disposal of an asset is less than what you paid for it) can be claimed against income.

Calculating CGT obligations

If and exactly how much CGT you will have to pay or how much loss you may incur is a question for your accountant or tax lawyer.

The Family Law Courts can take future CGT liabilities or losses into account if certain factors are present. For example, how the asset was acquired, the intentions of the parties at that time, and whether the asset sale is inevitable or part of a Court Order, may all be considered.

Transfer duty (formerly called stamp duty)

Generally, properties and motor vehicles in New South Wales are not subject to transfer duty if the transfer from one party to the other is pursuant to a Court Order or Financial Agreement under the Family Law Act 1975.

However, where a private company, owned by one party, transfers, say, a car owned by the company to the other party, transfer duty is payable by the party to whom the car is transferred.

Income tax – deemed dividends

In some cases, the ITAA may “deem” a party to have received a taxable dividend which will determine the income tax payable by that party. This could occur with:

  1. the transfer of cash;
  2. the transfer of an asset; or
  3. forgiving a debt owed to a private company by a party to the relationship.

A deemed dividend can occur where a private company:

  1. pays a shareholder or an associate of a shareholder; or
  2. forgives the debt of a shareholder or an associate of a shareholder.

“Payment” can even include the transfer of property or giving a guarantee and meeting guarantee duties.

An associate of a shareholder includes the relative or partner of, or trust or company controlled by, the shareholder. The party receiving the benefit (not the shareholder) is taxed at their full marginal tax rate.

For example, if your former partner owns a company which pays you money (not as part of a legitimate employment or other contract), the ITAA deems the amount you received as a dividend which is taken into account when calculating your income tax liability.

Trusts can also have deemed dividend consequences.

Exemptions, exclusions and marriage breakdown concessions to the deemed dividend provisions of the ITAA include:

  • loans on commercial terms;
  • the payment of genuine debts; and
  • having the deemed dividend receive the benefit of franking.

A dividend is franked when your income tax calculations take into account the tax already paid by the private company or trust so you are taxed at a lesser rate rather than your full tax rate.

Goods and services tax (GST)

Where a company, owned by one party, transfers a car to the other party, the party receiving the car will not pay GST on the transfer (because it is not made during the course of the business).

However, if the company claimed the GST on the purchase of the car as a credit, it may have to pay GST on the transfer. The company cannot retain the benefit of having claimed GST on its purchase because the car changed its “purpose” from being a company asset to private use. In that case, the transfer changes category of the car from an “enterprise asset” (used or intended to be used in an enterprise that is or should be registered for GST) to a “private asset” (anything that is not an enterprise asset).

What now?

There are many ways that a transfer or retention of assets can lead to tax consequences.

Obtaining taxation advice from an accountant or tax lawyer before entering into a property settlement involving a private company will ensure that you are informed of all tax issues. If you are unsure of the impact of the tax consequences of your or your former partner’s corporate structure or properties on a property settlement, contact us to assist you through the process. Where necessary, we can refer you to an accountant to obtain tax advice.


Family Law and Bankruptcy

What if my former spouse is declared bankrupt?

Bankruptcy and family law can collide when spouses separate, often as a reason for the separation or as an outcome of the separation. Families are experiencing higher levels of financial stress with inflation, rising property prices, increasing interest rates and stagnant incomes. With increasing economic uncertainty, bankruptcies are likely to increase in number and frequency.

In family law property settlements, a common issue when one party becomes bankrupt is how the non-bankrupt spouse’s entitlements are considered against those of the Trustee in Bankruptcy or creditor(s) and who has priority over certain property.

What is bankruptcy?

Bankruptcy occurs when someone a person is unable to pay their debts as and when they fall due. Under the Bankruptcy Act 1966 (Cth) a person can be declared bankrupt if:

  1. Someone to whom a person owes money (a creditor), makes an application to the Court; or
  2. A person owing money files a debtor’s petition (voluntary bankruptcy).

What is the effect of bankruptcy?

When someone is declared bankrupt, their assets go into the control of (or “vest with”) the Trustee in Bankruptcy. The bankrupt person loses control and possession of the assets. Some asset types are excluded, including most household goods, some tools of trade, superannuation, and a car or motorbike up to a certain value.

What if my former spouse becomes bankrupt?

Bankruptcy does not prevent a non-bankrupt spouse from pursuing a property settlement under the Family Law Act (“the Act”). The Act protects the non-bankrupt spouse’s interests in matrimonial or jointly owned property. A non-bankrupt spouse can also share in the bankrupt spouse’s vested assets for the benefit of the non-bankrupt spouse and their dependents.

The Federal Circuit and Family Court of Australia (“the Court) has the power to adjust property interests between spouses, regardless of whether an asset or liability is held jointly or in the name of one spouse only. An example is the way in which the Court deals with the former matrimonial home. If the property is in the bankrupt spouse’s sole name, the Court may treat it as joint matrimonial property, and make orders to protect the non-bankrupt’s interest in the property from the effects of the bankruptcy. The Court may, for example, order that the property be sold and the proceeds of sale be distributed to one or the other spouse.

The Court will always apply the following five step process when determining property settlements, regardless of whether a party is bankrupt:

  1. Determine and value the parties’ property;
  2. Determine if it is just and equitable to make an order altering the parties existing interests;
  3. Consider financial and non-financial contributions to property and the welfare of the family;
  4. Consider the specific needs and characteristics of the parties as set out in the Act; and
  5. Make any adjustments required to ensure that the financial settlement is just and equitable.

The Court must balance the benefit of making an order in favour of the non-bankrupt party against the effect of proposed orders on the creditor’s ability to recover debts from the bankrupt spouse.

What are the rights and restrictions of the Bankrupt Party?

The bankrupt party is not permitted to make submissions to the Court in relation to vested property unless the Court provides permission. They can, however, make submissions regarding property owned by the non-bankrupt spouse which has not been vested in the Trustee.

What are clawback powers and how do they impact my Family Law proceedings?

People who believe they are likely to go bankrupt sometimes pre-emptively transfer property that is in their name to their spouse. They do so under the belief it will avoid the Trustee in Bankruptcy having a claim to the property. Unfortunately, any transfer of property made in such circumstances for the period of 6 months prior to bankruptcy can be clawed back by the trustee in bankruptcy. The Bankruptcy Act provides that property clawed back is property of the bankrupt and is part of the bankrupt estate.

What now?

If your former spouse has declared bankruptcy, contact us for advice and assistance


Life Interest vs Right to Reside

When you own a property or part of a property in your own name, your Will determines what happens to that property. You may wish to give a loved one such as your partner or spouse (“the beneficiary”) the ability to live in a property, yet ensuring that it ultimately ends up with someone else (e.g. children from a previous relationship). One way to do that is by allowing the beneficiary to reside in a property (i.e. to have a right in the property) by giving them a Right to Reside or a Life Interest.

Right to Reside

A right to reside is where you give the beneficiary the right to live in your property for the period specified in your Will. The right to reside can be for the life of the beneficiary or for a specified time (e.g. 12 months from the date of your death), or until an event happens (e.g. when they remarry or enter into a de facto relationship).

The beneficiary’s entitlement to live in the property is normally subject to conditions such as maintaining the property and paying property expenses. The beneficiary has a right to live in the property but not to any income it generates.

The beneficiary’s right in the property is relinquished once they have ceased residing in it. When their right to reside ends, the property can either be:

  1. sold and the proceeds paid to the “remainder” beneficiaries named in the Will; or
  2. transferred into the names of the beneficiaries.

Some reasons you may want to include a right to reside in your Will include:

  • If your home is in your sole name and you want it to go to your children upon your death, but also want your partner to reside in the property until his/her death; or
  • You have an adult child who you want to have the benefit of residing in the property but not the income from renting it out; or
  • You have a new partner and children from a previous relationship, and you want the property to go to those children and your new partner. However, you want to allow your new partner to live in the property so that they are not forced out.

Life Interest

Leaving your beneficiary a life interest in your property is similar to a right to reside, but it gives the beneficiary more power and rights in relation to the property. The beneficiary (“the life tenant”) retains the interest in the property for life. On their death it reverts to the estate and is paid out in accordance with your Will.

The beneficiary has no entitlement to the capital of the property but is entitled to income generated from the property during their lifetime.

A life interest is a way of giving the beneficiary the right to use the property after you have passed away without them having actual ownership. The life tenant can live in the property or lease it and live off the proceeds. They can also sell the property and either use the sale proceeds to buy and live in a replacement property or invest the sale proceeds and live off the income. The life tenant cannot be forced to move out of the home or sell it against their wishes.

Example of a life interest

Christine and Chris are in relationship. This is the second relationship for both and they each have children from a previous relationship. They buy a property together as tenants-in-common, each holding a half share. They leave each other a life interest in the property in their Will and when that ends their share in the property goes to their own children.

Chris dies first. The life interest he leaves to Christine means that she can stay in the property for the rest of her life. She continues to own her half share in the house and has a life interest in Chris’s half share.

Christine decides the home is too big for her now that she is alone. In conjunction with Chris’s executor, the home is sold and a unit is purchased for Christine to live in. The unit cost less than the sale proceeds from the property. Christine uses her own money to pay half the purchase price of the unit. The other half is owned by the estate with Christine as the life tenant. In accordance with Chris’s Will, the extra money is held in trust and the income is paid to Christine.

When Christine dies, her right in the life interest in Chris’s share in the unit is relinquished. The unit is sold with Chris’s children receiving half of the sale proceeds and Christine’s children receiving her half.

Contact us now if you would like to include a right to reside or life interest in your Will.


Business valuation in Family Law property division

Around 70% of Australia’s 2.1 million businesses are family owned. Consequently, family businesses are often involved in a property division dispute following the breakdown of a marriage or de facto relationship.

Both parties have often worked hard and made sacrifices to help the family business along. Even where one party has the ownership and control of the business and the other party has never worked in or for the business, they have nevertheless invested in the business by virtue of the relationship. When a married or de facto couple separate, the family business is often a central issue in negotiating a property division.

Where either party has an interest in a business (whether it is held jointly by both parties, individually or with other people), that interest must be included in the pool of assets available for division between the parties. Unless the business is a very small and simple operation, it’s value must be determined.

The benefits of a business valuation

A business valuation ensures that an appropriate and reliable value is allocated to the business at a particular time. The parties provide the information required to negotiate a property settlement and achieve a pragmatic and reasonable property division.

If you intend to retain the business, it will not be in your interests to have an unrealistic or inflated or value attributed to the business. If your former partner wants to keep the business, it may be in their interests to claim the business is not performing as well as it actually is.

How to obtain a business valuation

A business valuation should be performed by an Accountant who is impartial (ie. not the Accountant for the business) and who has specialised business valuation knowledge based on their training, study or experience. The valuer should be carefully instructed regarding the factors they are to take into account when valuing the business and the preparation of the report in case it has to be used in Court. The valuer will provide a report attributing a value (or a range of values) of the worth of the business

Choosing the valuer

Each party can choose their own valuer. Separate valuations can be obtained if the parties do not initially agree on a joint valuer, or if the proceedings are before the Court and the Court allows separate valuation reports to be used. However, it can save time and money for the parties to jointly appoint an agreed valuer. Otherwise, each party may have a valuation report with differing values for the business, which may give rise to further dispute as to which report should be used.

The Court will generally only allow separate valuers if there is a good reason. The court will consider separate valuers if, for example, the jointly engaged valuer didn’t have all the information about the business, or if the way in which the valuation was done is different to standard practice.

The likely cost of a business valuation report

Business valuation reports are generally quite costly. A formal report (able to be used in Court) will generally cost about $10,000 to $15,000 for a relatively small business (less than 15 employees). However, a preliminary report can usually be obtained for about $5,000. Although it cannot be used in Court, a preliminary report may greatly assist the parties with negotiations.

Dealing with the costs of the business valuation report

If the parties agree to appoint a joint valuer, the parties usually equally share the cost of the preparation of the report. A party choosing to instruct their own valuer pays for the preparation of the report.

What is included in the valuation report?

A business valuation report will include:

  • The information on which the valuer has based the valuation,
  • The methodology the valuer used to reach the value, and
  • The value attributed to the business as at a particular date.

Parties negotiating a Family Law property division may perceive that a business has no value because “it doesn’t own any assets” or “we don’t make much money from it.” and on that basis agree to exclude a business interest from the property available for division. However, such perceptions are often inaccurate. A business valuation report can be prepared relatively quickly and easily and, although appearing costly, can be an invaluable tool in assisting parties to achieve a fair and equitable property division.

How Can We Help?

If you need assistance during a separation or want to know more about the potential impact of a family business in Family Law property division negotiations, contact us now for a free consultation.

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