A divorce can be an incredibly stressful time for anyone involved. All parties want to achieve the best possible outcome for themselves when their marriage breaks down and, as a result, dividing assets can be a difficult process.
However, if you receive legal advice about the options available to you, then you should be able to minimise the emotional and financial cost of the process. In this blog, we’ll cover what assets are included in the asset pool, how these assets are valued and how these assets are divided.
What matrimonial assets are included in the asset pool?
In a family law property settlement, the asset pool is the total net value of all matrimonial assets. This pool will include assets, liabilities and superannuation interests in the name of both parties, in the name of either party and that are under the control of one party.
Identifying the assets that are `matrimonial’ or `relationship’ and so available for distribution between a separating couple is an important and sometimes complex step in a property settlement. If you and your spouse or de facto partner cannot agree as to what assets are matrimonial or relationship, the court will have to decide this.
From the outset, it is important to understand that the usual approach by the court in this regard is to value the matrimonial/relationship assets as at the date of trial and not as at the time of separation.
By the time of Trial, which depending on circumstances may be 18 – 24 months after proceedings have been commenced it is not uncommon for the value of assets to rise or fall, sometimes significantly.
While the Court will consider the changes carefully and, if appropriate, attribute such changes as being a contribution, positive or negative by a party (which may increase or decrease their overall entitlement), the value of the asset will be taken as at the date of the trial.
This approach does not mean a party can “dispose” of an asset prior to settlement, in an attempt to remove it from the pool of assets without consequence. If a party wrongly disposes of an asset following separation, the court will carefully consider the factual circumstances and may decide to notionally “add back” the asset and its value, treating that asset as part of the matrimonial/relationship and will be taken by the person who dealt with t as part of their share. This is a complex area of law and cases surrounding it are developing the law regularly.
According to a recent study, the following ‘basic assets’ are usually divided in a settlement. The most popular 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?
Valuing matrimonial assets is essential for resolving a family law matter. However, it can be contentious. Here’s how the value of many of these items is determined:
Land and homes are usually the largest value assets shared in a relationship. Often, parties are able to agree on a value after appraisals from real estate agents. However, it is often better to obtain an independent valuation by an expert jointly engaged by both parties, particularly as the value will be more precise than an appraisal. This is also preferred by the courts when there is a dispute over value.
An independent expert should always be used to help parties agree on a value for a business, even if your business has an in-house accountant. Parties should jointly instruct a specialist accountant to carry out a business valuation. 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.
A jointly appointed expert can be used to obtain a true value of a motor vehicle. However, if the value of the vehicle isn’t that high, it can be simpler to use a website such as Carsales or Redbook to provide a value range and agree on a price based on this.
Furniture and jewellery
Family law courts tend to adopt a conservative approach to valuing furniture and jewellery, which means that they often use the second-hand value, not the insured or replacement value.
Again, independent valuations can be used, but you should consider whether this is a worthwhile cost given the likely value of the item.
How does the Court divide the matrimonial assets?
If mediation and/or other negotiations fail and you need go to court to reach a settlement, then the court will make a decision it believes is ‘just and equitable’ for both parties.
The court will:
- Consider the value of the assets after the payment of any remaining liabilities;
- Consider the contributions made by each party, including:
- Financial contributions;
- Non-financial contributions, e.g. repairs to a property or unpaid work in a family business;
- Contributions as homemaker;
- Contributions as a parent;
- Asses the current and future circumstances of the parties in accordance with a list of factors such as:
- the age and state of health of each of the parties;
- the income earning capacity or disparity between the parties;
- the length of the relationship and its effect on each of the parties’ income earning capacities; and
- who will have primary care of the children into the future.
- 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.
As the court can apply as much weight to these factors as it believes to be necessary, there is no set formula for calculating how much each party will receive.
Many couples can resolve their financial issues outside of court but whether you are able to negotiate an outcome yourself or you require a court to do so, you should seek independent legal advice about which approach may be best for your situation and what your likely range of entitlement is.
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