8 Common Misconceptions Concerning Property Settlements

In its simplest form, a property settlement is an agreement made when a married or de facto relationship comes to an end that sets out which party will get what with regard to the assets of the relationship.

The ‘property pool’ to be divided includes, not just any house or land, but other items such as business interests, money, vehicles, jewellery, investments, inheritances and superannuation entitlements, net of amounts owed.

When it comes to property settlements, there are many misconceptions about what legal rights apply and the Court process. This can cause unnecessary stress and confusion for couples going through separation and divorce.

There are no categorical rules that apply as to who gets what in a property settlement. The reality is that each property settlement will be different as each is decided on its own facts. And the Family Courts do not always divide property in expected ways. We can, however, dispel some of the commonly held myths that do not influence a property settlement.

1. It is necessary to be divorced before dividing property

It is not necessary to wait the 12 months required for a divorce, and it is possible to finalise your property settlement as soon as you have decided to separate. Indeed, it is often advisable to sort out arrangements as soon as possible. This is because asset values can change, and valuations are likely to be better done nearer to the time of separation.

 2. Property will be divided equally at the end of the marriage

The Court must follow a stepped process when dividing property in determining a property settlement. This involves:

• identifying the assets and liabilities of the couple;
• assessing the contributions made by each party, both financial and non-financial. If the relationship has lasted a long time, the Courts may view these contributions as being equal, resulting in an equal division of property;
• considering the future needs of each party - the Court will examine each party's future economic circumstances, such as the ability to support themselves and any dependent children; 
• assessing whether or not the order proposed is in the round ‘just and equitable’.

3. Assets held in a company or trust will be excluded from the division

The definition of property is very broad under the Family Law Act and includes business interests. Usually, assets held by a company or trust will come within the definition of property. The Courts will look at who controls these structures. If the entity involved is under the control of one of the parties to the proposed property settlement, the Court has the power to deal with the property as an asset of the relationship.

4. Assets can be excluded from the settlement by putting them in another’s name

As outlined, it is inappropriate to claim that an asset not held in a person’s name but over which they have control is not their asset and so not an asset of the relationship. Similarly, it is inappropriate for a party to transfer property ownership because they do not want to be included in the property ‘pool’. This could be deemed fraudulent and may be set aside by the Court.

5. Ownership remains with the person who brought the property into the marriage 

In considering a property settlement, the Court firstly identifies and values the property owned by the parties. It does not normally matter who paid for the property or whether it was acquired before or during the relationship.

An exception may be in a short marriage when the Court might return to the parties the property each of them brought into the marriage.

6. Property acquired after separation will not be divided

The property pool is based on the date of the hearing, not the separation date. Property acquired after separation, even if it was acquired with another person. For this reason, it is usually best to make a property settlement as soon as possible after separation.

7. The spouse causing the separation will, as a consequence, receive a smaller share

Although it may be believed that the person who was the primary reason for the separation deserves a smaller share, this is not the legal position. Australia has a ‘no-fault’ divorce law. Actions such as adultery will not be regarded as a significant influence on the property settlement. Other misconduct, such as domestic violence, may be an exception.

8. Pre-nuptial agreements are irrelevant

Contrary to popular belief, pre-nuptial or Binding Financial Agreements have been used in Australia for a number of years. They can record what assets and liabilities each person brings to the relationship initially. They can also set out what has been agreed will happen if the relationship breaks down, how the couple’s finances are to be dealt with and how their assets are to be divided. As long as they are prepared and signed in accordance with the Family Law Act, they should be binding.

The importance of legal advice

It is perhaps understandable that misunderstandings arise concerning property settlements, as they are infrequently encountered by individuals though not family lawyers! The myths need to be disregarded, and help sought early in the process in trying to make a settlement as soon as practicable after separation. This is notwithstanding the fact that, if married, you have 12 months after your divorce to make an application for a property settlement or, if in a de facto relationship, you have 24 months from the date of separation to finalise the property settlement. 

It is also important to understand that no two cases are the same, and the Courts have wide discretion to make decisions that can result in very different outcomes.

Contact our Property Settlement and Family Law Solicitors in Sydney, NSW

Szabo & Associates Solicitors can provide expert advice regarding property settlements and all family law matters. Please contact us on 02 9281 5088 or fill in the online contact form.