In the first two parts of our property settlement process article we dealt with the identification of the net asset pool and the assessment of contributions each party made to the relationship.
In this third and final part we will discuss the assessment of future needs and the division of assets.
It’s important to remember that the division of matrimonial assets does not need to involve proceedings before a Family Court Judge. In most instances, our team is able to arrive at a fair result for you through negotiation with the lawyers representing your former spouse.
Having determined the net asset pool and taking into account of the contributions made by the parties, the future needs of each party are then considered.
Factors relevant in assessing future needs may include:
- The age of the parties
- The health of the parties and any significant ongoing costs associated with healthcare or illness
- The income earning capacity of the parties. This is particularly relevant where one party has benefited from the care and support of the other party at home and has been able, as a result, to develop a high paying career which will continue to provide significant income in the future
- Whether either party has access to a financial resource that is NOT included in the asset pool– such as a potential benefit under a family trust.
- The level of costs each party will bear in the future for support and care of children
- Whether child support is being paid.
Some parties, have difficulty in coming to terms with the requirement to assess each party’s future needs and the effect that step has on the ultimate percentage of the pool each party will receive.
For example, if one party leaves a marriage with a lower future earning capacity than the other, the party with the lower earning capacity often receives an additional percentage adjustment in their favour.
While the parties may be assessed to have in the past made equal contributions to the asset pool, an adjustment for future needs may result in the lower earning party or the party having the primary care of children, receiving an additional percentage of the pool. For example, if the contribution factors were equal (50% / 50%) an additional percentage adjustment of say 10% would result in one party receiving 60% and the other party 40% of the net pool to reflect the future disadvantage of the first party.
Once a percentage is agreed or determined, that percentage is applied to the asset pool and each party takes net assets to a value representing their percentage entitlement.
To achieve that result, one party may agree to receive an asset and borrow to “pay out” the other party or agree to a split of their superannuation entitlement to the other party.
If both parties wish to keep the same asset, the party with the closer connection to the asset usually prevails or the parties can “bid” for the asset.
A realistic and step by step approach will often lead to an early satisfactory property settlement result.
If you have any questions about the property settlement process for yourself or in relation to a client you are advising, please contact a member of our family law team for more information.