Generally, the first step in the process of doing a family law property settlement is determining what property is available to be split. This property is called the “net asset pool”.
The net asset pool consists of all of the assets of the relationship, less its liabilities. In a family law context, an asset is any property of the relationship (whether tangible or intangible) regardless of whose name the property is in, that has value, whereas a liability is a type of debt, financial burden or responsibility of the relationship.
Duty of Disclosure
The parties to the relationship have a duty to disclose any assets or liabilities in their possession, care or control. This includes assets in any country, held in any capacity (including jointly with another person, as part of a trust, or as part of a business). Where a party fails to comply with their duty of disclosure, the Court may force compliance via Court Orders. For more information on a party’s duty of disclosure, please refer to our article on the duty of disclosure and the Family Court’s duty of disclosure brochure.
Common assets and liabilities
Some of the common assets that form part of matrimonial pool, and are able to be subject to a property split, include:
- The matrimonial home;
- Any investment homes;
- Cash in bank;
- Shares or an interest in businesses or companies; and
- Boats and vehicles.
As discussed above, liabilities are also included within consideration of the net asset pool, and are subtracted from the assets in the pool. Common liabilities which are subject to a property split include:
- Personal loans and credit cards;
- Outstanding debts of the relationship, such as unpaid school fees; and
- Tax liabilities.
Complex/uncommon assets and liabilities
Sometimes, a dispute at law arises about whether certain assets of the relationship should form part of the net asset pool. By way of example, these commonly include:
- Companies or Trusts – The Court has also made decisions in the past where they have made orders binding on companies or trusts, even though they are separate legal entities from the matrimonial parties. The Court, in the past, has dismantled elaborate trust structures, with the view that those trust assets form part of the net asset pool. Sometimes these entities are included and sometimes they aren’t, which is why it is important to get advice from an experienced legal advisor.
- Superannuation in the payment phase or invalidity pensions – In relation to superannuation, there have been Court decisions where a superannuation split has been ordered even in superannuation that is in the payment phase.
- Inheritances, or other windfalls such as lottery winnings or personal injury compensation – In most cases, , windfalls such as inheritances, lottery winnings and personal injury compensation that are received during the relationship can form part of the net asset pool. Where these occur after the parties have separated it can be more complex.
- There have been cases where lottery wins from tickets purchased after the parties separated have been dealt with as a separate to the “pool” for distribution, as the source of funds was not from a “joint endeavour” of the parties.
- A similar principle can be applied to inheritances and other windfalls received after separation.
- If you have any queries about inheritances or other windfalls received after separation, please contact our office.
- Liabilities that are arguably wastage, such as gambling debts – The Court has in the past made decision that exclude certain debts of the relationship from the net asset pool where a party has engaged in wastage of a pool’s assets.
Items that are not “property”
- Future Income – In order to be considered property, a party must have a “present entitlement” to the relevant item. As such, income that has not yet been earned cannot be considered property, as the relevant income earner is not currently entitled to receive those funds.
- Note: vested rights of superannuation, redundancy, and long service leave have been considered “property” by the Courts, whereas future (or non-vested) entitlements to same have not been.
- The relevant person has to be able to access the relevant income right away, not in some distant future.
- Assets owned by others – for an asset to be included in the “pool”, it must be owned (at least in part) by a party to the relationship. Where a party regularly receives financial support from family members or is part of a wealthy family, those external assets cannot be included in the pool.
- Note: where a party has significant financial support from family/friends, this is a factor that can be considered by the Court
In the above circumstances, these items that aren’t part of the “pool” but are likely to have a significant financial impact on a party are taken into account when the Courts determine what portion of the “pool” each party should receive.
If you have any questions about your family law property settlement, please contact our office on (07) 3252 0011 for your free initial consultation with one of our family lawyers.