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.

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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.

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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

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