HOW DO WE DIVIDE UP OUR ASSETS AND LIABILITIES
In working out how a property and financial settlement will occur, we must follow a 4 step process.
Step 1: Identify and value ALL assets/liabilities that make up your asset pool.
Assets are things that you own that have a value, such as Property, Cars, Bank Accounts, Shares, Superannuation and an interest in a Business.
Liabilities are debts, money that you may owe, such as Mortgage, Loans, Credit Cards.
If you can’t agree on the value of an asset/liability then an expert such as a licenced valuer may be brought in to help determine the value. Other factors also need to be considered in determining valuations such as taxation and stamp duty.
It does not matter whose name the assets/liabilities are in, they must all be disclosed.
To ensure that your matter is fair, you must not hide or fail to disclose any assets/liabilities, by doing so you may be found in contempt of Court.
Once all assets/liabilities are identified and valued, we can calculate what the value of your net asset pool is by reducing the total amount of the assets by the total amount of the liabilities.
The net asset pool is the amount of money that is up for distribution between you and your former spouse.
Step 2: Assessing the contributions that each of you made during the relationship
There are 4 different types of contributions that are considered in determining the ‘percentage’ of contributions that each party has made. These are Financial Contributions, Parenting Contributions, Homemaker Contributions and Non Financial Contributions.
Financial Contributions are all monetary contributions that each of you have made throughout the relationship such as income and salary, inheritances, lotto winnings and how much each of you had at the start of your relationship
Parenting Contributions are basically the amount of parenting that each of you have done such as taking a child to school, helping with homework, spending time with them, bathing them etc. If one party has not worked and instead stayed at home to care for the child/ren then the stay at home parties parenting contribution is seen as equal to the salary contribution of the other party.
Homemaker Contributions are contributions such as cleaning. Vacuuming, cooking, washing etc. These are similar to parenting contributions.
Non Financial Contributions are contributions that a party has made that has added value to the asset pool such as renovating a property. The value of these contributions are generally determined by how much it would have cost to pay a third party to do the same work.
Step 3: Assessing each parties Current and Future Needs and the cost of those Needs
The following is a list of some of the needs that need to be assessed for each party:
- Age and health
- Income, property and financial resources
- Capacity to earn an income
- Parent or sole carer of children under the age of 18
- Commitments that are necessary to provide for themselves or a child
- All parties are living a reasonable standard of living
- Duration of the marriage
- The maintenance of the property that affected the earning capacity of a party
- The need to protect a party
- If a party is assessed as having current and/or future needs then we need to determine the cost of those needs.
Step 4: Just and Equitable
Ultimately the practical effect of any proposed financial and property settlement needs to be considered and whether such settlement is ‘Just and Equitable” to both parties. This decision is made once all of the above steps have been taken into account.
Once steps 1, 2 and 3 have been assessed, we can then determine the percentage that each party is entitled to. In some cases the total value of assets that a party is to receive from the net asset pool may be higher than their actual entitlement so they will need to pay the other party X amount to make up that adjustment.
