In general, assessing the parties’ contributions to the asset pool of the marriage or de-facto relationship is the second step in determining a split of the assets of the relationship (or a property settlement) through section 79 of the Family Law Act 1975 (Cth) or section 90SM of the Family Law Act 1975 (Cth). This follows the identification of the asset pool itself, which is the first step.

Assessing the degree of each parties’ contributions affects the split of the property pool. Greater contributions by a party may mean a higher entitlement for that party, subject to no further percentage shifts in the remaining steps of the four-step property settlement process.

There are a number of different types of contributions that the Court will take into account under section 79 of the Family Law Act 1975 (Cth) or section 90SM of the Family Law Act 1975 (Cth).

The types of contributions include:

Financial contributions

These are contributions of a financial nature of a party to the relationship, or on behalf of a party to the relationship, or a child of the relationship, to the “acquisition, conservation or improvement of any property of the parties” to the relationship.

These can include significant assets or superannuation brought into the relationship at the start of the relationship, or the contributions of salary and superannuation or other earnings generated during the relationship.

Non-financial contributions

These are contributions by a party to the relationship that may not have a “price-tag” to a party of the relationship, or on behalf of a party to the relationship, or a child of the relationship to the “acquisition, conservation or improvement of any property of the parties” to the relationship.

These can include home improvement or renovations done by a party in order to improve the value of the matrimonial or investment home.

Homemaker or parenting contributions

These are contributions by a party to the welfare of the parties to the relationship (including any children) in the capacity of homemaker or parent.

These include parenting duties, cleaning duties and general house maintenance duties. The Courts have consistently taken the view that these contributions have equal weight as financial and non-financial contributions.

The Court will also consider the contributions made at different stages in the relationship. For example, in a short relationship, the contributions that were made by a party at the beginning of a relationship bear greater weight than they would in a long relationship. The weight that attaches to initial contributions is known to erode with the effluxion of time. Thus, a party that contributes, at the start of a short relationship, the majority of the assets, has grounds to leave the relationship with most of those assets; but not so if the relationship has endured past the 5 to 7 year mark.

Specific types of contributions may also be relevant to certain assets. For example, physical care provided to an injured partner may be a relevant contribution in determining whether the other partner should receive any part of a personal injury compensation payment received by the injured partner.

A gift by third parties, to a party to the relationship, on behalf of the relationship may also sometimes be a classified as a contribution. Common examples of such gifts include monetary gifts, assistance with home purchases or furniture from parents to the parties of the relationship.

Specific legal advice tailored to your circumstances is desirable  to determine what weight attaches to the contributions you made to the relationship.

There are generally two other steps for the Court to consider once contributions have been ascertained.

If you have any questions about your family law property settlement, please contact our office for a free initial consultation with one of our family lawyers.

When partners separate, one of the most painful issues is how to divide the assets and liabilities accumulated before, during and after the end of the relationship.

Adding to the complexity are questions around what you have to disclose to the other party about your financial position.

The Obligation

The Family Law Rules 2004 and the Federal Circuit Court Rules 2001 stipulate that parties in family law proceedings are to make “full and frank” financial disclosure to each other.

This means you must disclose all aspects of your financial position regardless of the other party’s previous knowledge of or involvement in your financial matters.

The obligation under the Family Law Rules to make financial disclosure applies whether the property, financial resources or earnings are owned by you, come to you directly, or go to some other person or beneficiary.

You must also disclose interests that you hold jointly with any other person including property or interests in property that are held by you and your former spouse or de facto partner together.

The Documents

In practice, “full and frank financial disclosure” means you are required to provide all information and documents in your control or possession that evidence your financial position and net worth.

One judge commented that this is an obligation of “show & tell” not “hide & seek”.

This includes, but is not limited to documents and information in relation to your:

  • Personal or business income
  • Pension or superannuation funds
  • Financial resources including child support, trusts or other payments
  • Business holdings
  • Investment holdings
  • Real property
  • Vehicles and watercraft
  • Winnings, inheritances, compensation, pay-outs or claims
  • Other assets in your control or possession
  • Debts and liabilities

Additionally, Family Law Rules act requires you to disclose all information about property that has been disposed of by you – or with your authority or permission whether by sale, transfer, assignment or gift – that occurred in the year immediately before your separation.

The Fail

If you do not disclose all matters relevant to your financial position and/or you attempt to put assets out of the reach of the Court or the property settlement, then the Court has the power to reverse various transactions or impose serious penalties for your conduct, including:

  • Awarding a greater portion of the property pool to your spouse or partner as compensation
  • Making an Order that you pay your spouse or partner’s legal costs
  • Finding that you are guilty of contempt of Court, and imposing a fine or a term of imprisonment

If you have any questions about your family law property settlement, please contact our office for a free initial consultation with one of our family lawyers.

The Family Court of Australia and Federal Circuit Court of Australia have recently introduced the National Arbitration List, where family law matters in the Courts will be sent to an external Arbitrator to be finalised. This is good news for parties in the Court system, as preparation for and attendance at an arbitration can often be quicker and less expensive than a contested final hearing at Court.

What is arbitration?

Section 10L of the Family Law Act 1975 defines arbitration as ‘a process in which parties to a dispute present arguments and evidence to an Arbitrator, who makes a determination to resolve the dispute’. This means your matter will be determined by a suitably qualified Arbitrator, not a Judge. Under the Family Law Regulations 1984, Arbitrators are legal practitioners who specialise in Family Law, have completed arbitration training, and are registered with the Law Council of Australia. Arbitrations can be entered into privately or in compliance with a Court Order.

Under section 10L(2) of the Family Law Act, parenting matters cannot be arbitrated – only financial matters are eligible for arbitration.

Will I be forced to attend arbitration if I don’t want to?

Arbitration requires parties to ‘opt-in’; parties must consent to attending arbitration before the Court will order it to occur. Section 13E of the Family Law Act confirms this, and states that the Court can only make an order referring proceedings to an Arbitrator ‘with the consent of all parties.’ As such, if you do not want to attend an arbitration, then you do not have to, and the Judge will continue to make decisions in your matter.

What happens at arbitration?

Once all parties agree to attend arbitration and/or the Court has ordered that the parties are to attend arbitration, the parties select their Arbitrator and schedule an arbitration date. Then parties must then prepare relevant documents (such as an Application in an Arbitration, subpoena in an Arbitration, Response to Application in an Arbitration, etc.) and provide them to the Court/Arbitrator.

Arbitration runs a lot like a Court mention, only with less formality. On the arbitration date, the parties will attend arbitration (either in person or over the phone) with their legal representatives. The parties’ representatives will each address the arbitrator and present their arguments and evidence in the dispute. Once the Arbitrator has had time to consider all the arguments and materials, they will deliver an Award, which can be registered as an enforceable Order of the Court.

What’s the difference between arbitration and Court?

Arbitration offers a more flexible and efficient means of resolving disputes than the Court process. It is less formal than the Court process, and the process can be customised to suit the parties and their needs. Parties are able to present their arguments and get determination of their dispute quickly and potentially more cost-effectively. Unlike in Court, parties are able to choose their Arbitrator, the date of the arbitration (within some limits), and often the location of the arbitration. Importantly, parties are generally able to resolve their matters within a matter of months rather than waiting up to three years to have their matter determined by the Court. In addition, arbitration is often a more cost-effective way to resolve your matter.

What is the National Arbitration List?

The National Arbitration List has been established by the Family Court and Federal Circuit Court in an effort to reduce the strain on the system causing excessive delays and costs to parties. Essentially, the Court will order that consenting parties attend arbitration, and one of three Judges will be assigned to manage the case whilst the arbitration process runs its course. When the managing judge receives the case, they will allocate a mention date for the matter four months in the future. That date will either be vacated (because arbitration has already happened), administratively adjourned (because arbitration has been scheduled to happen after the mention date), or called over to ascertain the progress of arbitration. Should the Court need to intervene to ensure compliance with the Court Orders or any directions of the arbitrator, they will do so at the mention.

To learn more about the National Arbitration list and arbitration in general, click here.

We understand that property matters can be very complex and can take an emotional toll on all parties involved.

If you have any questions about your family law property settlement, please contact our office for a free initial consultation with one of our family lawyers.

Bankruptcy and taxation issues should never be overlooked. This article discusses how these two financial areas might affect a family law matter, and the ramifications of failing to consider them.

Bankruptcy Issues

Bankruptcy is the legal declaration that a person is unable to pay their debts within a reasonable time. When a person is declared bankrupt, nearly all of their assets are placed with a bankruptcy trustee and then sold to pay the person’s debts.

In a family law matter, bankruptcy can occur at any of the following key events:

  • cohabitation;
  • marriage;
  • separation;
  • negotiating a property settlement;
  • documenting a settlement;
  • having orders made under the Family Law Act 1975 (Cth);
  • implementing those orders;
  • death; or
  • subsequent bankruptcy.

If faced with a bankruptcy in a family law matter, the consequences are significant and cannot be ignored.

The Australian Taxation Office may take legal action to recover outstanding tax and superannuation debts (depending on whether the debt is owed by an individual (or sole trader), partnership, trust, superannuation fund or company. This may include any of the following:

The interaction of family law and bankruptcy was simplified by amendments introduced to the Bankruptcy Act 1966 and the Family Law Act 1975 on 18 September 2005. In short, a property order can be made by the Family Law Courts even though property has vested in the bankruptcy trustee of a party which alters the interests of the trustee in the vested bankruptcy property.

The bankruptcy trustee may be joined as a party to proceedings in which a property order is sought and a party was a bankrupt, or before completion of proceedings a party becomes a bankrupt. If an application is made by the non-bankrupt spouse, the bankruptcy trustee may also be restrained from distributing dividends among creditors. Upon a bankruptcy trustee becoming a party, the bankrupt party is not entitled to make a submission to the Court in connection with any vested bankruptcy property without the Court’s leave.

Most importantly, the 4-step property settlement process still applies where a spouse is or becomes a bankrupt during the proceedings. This would include, but not be limited to, the potential transfer or sale of the former matrimonial home (which, contrary to popular belief, is not “a protected asset” under the Bankruptcy Act 1966).

Spousal maintenance may also be a “live issue,” such that the liability of a bankrupt party to maintain the other spouse may be satisfied, in whole or in part, by way of transfer of vested bankruptcy property in relation to the bankrupt party.

Taxation Issues

A Family Law matter will often give rise to immediate and/or long-term taxation issues where property division is involved – especially where one or both partners have an interest in a company or trust.

For instance, if capital gains tax (“CGT”) marriage breakdown roll-over relief applies to a post-GST asset while no immediate CGT liability will arise to any party, the transferee spouse may well be burdened with a potentially large CGT liability that is inherent in the asset if the asset’s market value at the time of roll-over exceeds the cost base of the asset at that time.

Alternatively, in other instances, an election available to one party in relation to a dwelling can significantly benefit the other party and this benefit must be considered in calculating entitlements and framing appropriate property orders.

The taxation issues that may arise to be considered in the course of negotiating a family law property division are often but one of a number of considerations that must be taken into account. Therefore, there may be other factors in a family law property division which will mean that a particular course of action is adopted, despite some tax advantage to one or both parties.

The Family Law team at Corney & Lind Lawyers is dedicated to seeing clients make fully informed decisions in their circumstances by providing them advice that is accurate and comprehensive.

If you have any questions about your family law property settlement, please contact our office  for a free initial consultation with one of our family lawyers.

Estate Litigation: Real Property Transfers, Undue Influence & Unconscionable Conduct – do you have grounds for an equitable claim to increase the size of an estate?

When a loved one passes away, what they give to others in their Will is undoubtedly significant to those people in holding dear the memories of that loved one.  Real property is perhaps one of the most significant assets that can be given in a Will, out of the deceased’s estate.

What happens when real property is transferred to someone else before a person passes away?  The immediate effect of this is that the real property will no longer form part of that person’s estate and it cannot be gifted under their Will.

Of course a person has freedom to deal with their property as they wish, but in circumstances where real property is transferred during a person’s lifetime because of the undue influence or unconscionable conduct of another person, the High Court has held that these transactions may be set aside.

The basis of this court action is in equity, and a claim to set aside a transaction or for compensation can be brought before a person passes away (by the person themselves) or after their death, by persons who would be entitled to benefit from the deceased’s estate.  The latter claim may be brought in the context of a family provision application.

Two recent cases in Queensland provide guidance for the court’s approach in giving orders for property transfers to be set aside after the previous property owner passes away.

 

Equitable claims after a person’s death

In Anderson v Anderson [2013] QSC 008, the Queensland Supreme Court granted an application by John Anderson for a declaration that a transfer of his mother’s property during her life to her other son, Malcolm Anderson, was void or voidable on the basis of Malcolm’s undue influence.  This application was brought after the mother, Roma Anderson, passed away.

In this case, Roma had made a will in 2007 leaving everything to her two sons in equal shares and appointing John as first executor.  John and his wife Deborah were also appointed as her attorneys in relation to health and financial matters.  Then, in 2008, Roma made a new Will with the same distribution but appointing both John and Malcolm as executors.  That same day she signed a transfer of her family home to Malcolm, for consideration of “natural love and affection”.

The question of whether Malcolm knew or ought to have known whether Roma had sufficient capacity to transfer the property was not raised by John as the applicant.  What was established was that Roma was found to have been pressured and influenced by Malcolm in giving instructions in 2008 to change her will and transfer the property.

In the circumstances, Roma:

    • was elderly, sick and very isolated from others;
    • was dominated by Malcolm to question John’s dealings with her finances as attorney;
    • became increasingly and heavily dependent upon Malcolm for her day-to-day care;
    • experienced some symptoms of memory loss and dementia; and
    • gave the 2008 instructions on Malcolm’s prompting and, in all but one meeting with her lawyer, in his presence.

These circumstances gave rise to the presumption of undue influence, and Malcolm was unable to otherwise show that Roma signing the transfer was the result of a free and voluntary exercise of her independent will.

While it was not considered in detail, the Court indicated that Malcolm’s conduct was also likely to amount to unconscionable conduct, as he took unfair advantage of Roma’s position of special disadvantage.

The Court found that the transfer of the property rendered Roma’s estate almost worthless, and gave orders to set aside the transfer so that the property would form part of her estate as at her death, to be distributed in accordance with her will.

 

Will delay prevent me from bringing an equitable claim?

The issue of delay in bringing an equitable claim was considered by the Queensland Court of Appeal in the case of Gillespie & Ors v Gillespie [2013] QCA 99.

On 17 December 2002, Bruce Gillespie transferred a house and two home units to his three children from his first marriage, nine days after his marriage to his second wife, Gloria Gillespie.  Bruce passed away on 14 August 2010.

Upon Gloria’s application, commenced 10 January 2011, the District Court held that the transfer of the house resulted from the unconscionable conduct and undue influence of Bruce’s son, Geoffrey Gillespie.

The Court found that Geoffrey’s conduct included:

    • falsely asserting to Bruce that he would need to transfer the properties before his death to avoid death duties (which did not actually exist);
    • inducing unsubstantiated ideas in Bruce’s mind that Gloria intended to deprive the children of their inheritance; and
    • taking advantage of the elderly age and disadvantage of his father, who relied upon Geoffrey for his financial affairs.

The Court ordered that the transfer of the house be set aside and the property be transferred to Gloria as administrator of the estate.  Bruce’s three children (the “Appellants”) appealed this decision to the Queensland Court of Appeal, arguing that:

    • Gloria (and during his lifetime, Bruce) acquiesced to the transfer by not giving prior notice of the right to a claim or exercising that right at an earlier time; and
    • Gloria’s delay in commencing the application resulted in prejudice to themselves and others, because (for example) Bruce was unable to give evidence and the Appellants had changed their financial positions in reliance on their title to the property.

In dismissing the appeal, the Court of Appeal found that:

    • Bruce and Gloria had modest resources with which to commence legal proceedings;
    • the legal advice Gloria received in relation to her rights to a claim had been extremely limited;
    • as Bruce’s attorney, Gloria believed his wishes were not to commence proceedings during his lifetime, to avoid disputes amongst the family;
    • Bruce’s degenerating memory meant that his evidence would not have made a material difference had the claim been brought during his lifetime;
    • there was no evidence that the Appellants had altered their affairs on the basis of their property ownership; and
    • as there was no claim for recovery of the proceeds of the units which had been sold, the potential prejudice to estate if the transfer of the house was not reversed far outweighed the prejudice to the Appellants.

In this case, the order to set aside the transfer of property was upheld, even though the application was brought more than 8 years after the transfer.

A court will consider your particular circumstances in deciding whether delay should prevent you from obtaining orders to have a transfer set aside.

 

Do you need tailored legal advice for your circumstances?

In administering a deceased estate, the cases of Anderson v Anderson and Gillespie & Ors v Gillespie emphasise the importance of considering the basis of any significant property transfers made during the deceased’s lifetime and the nature of their relationships with family and other beneficiaries of their estate, as well as the specific terms of their Will.

 

Have a query regarding real property transfers that occurred prior to the deceasing of a loved one? 
Contact us.

If you consider a potential equitable claim may be brought to set aside a transfer of property, we suggest seeking advice from our Brisbane Estate Litigation lawyers, even if the previous property owner has passed away or many years have gone by.

Can I delay inheritance from my children until they are 25 years old?

As a parent you may be concerned about the maturity of your child/children to manage wealth at an early age.

The question is: Can you cause a delay inheritance from your children, until they are older?

The short answer is: technically yes, but it’s complicated.

 

The starting point – Saunders v Vautier

Often, lawyers will tell you that drafting a minimum age clause into your will is a “smoke screen” and that your child/children would be entitled to challenge your will and inherit early when they reach 18.  For the most part, this is true.

We look at the long standing case of Saunders v Vautier as an example of this. It determines that if a beneficiary who has full legal capacity reaches 18, they will be able to challenge the clause that prevents them from receiving their inheritance at a later date. This is provided that they have a vested interest in the gift.

If there is more than one beneficiary (e.g. more than one child entitled to the same gift) these beneficiaries must be acting unanimously in order to challenge the will.

In this case, it is possible to draft a will which can prevent a child becoming entitled to their gift until they reach a later age.

 

Contingent v Vested interests

A Will-maker can decide on: a “vested interest” or a “contingent interest”.

Contingent interests in a will can (with careful drafting) prevent your children from inheriting under your will until they reach a certain age.

Under a will, an interest will be granted to a beneficiary (e.g. your child) but an event must occur, or that beneficiary must satisfy some condition, before the gift can be released to the beneficiary.  An example of such a condition is the need to obtain a certain age.

A Vested interest will exist if a person has a certain interest in the property being gifted even if the gift is postponed or delayed.

It was held in the case of Austin & Anor v Wells & Ors [2008] NSWSC 1266 that, “If the person’s interest depends upon a contingency which may or may not occur, he or she does not have a vested interest, but a contingent interest.”

 

Example Drafting

If you need to create a contingent interest under a will, careful drafting would need to be done.

For example, this is provided that “if” your child reaches 25, particular gifts will be dispersed to them, and should they fail to reach this age as a condition precedent another beneficiary such as a charity or a grandchild will inherit under your will instead.

In this case, because the child reaching 25 is a condition precedent and, in the event that the child passes away prior to attaining this age another beneficiary will become entitled. The child therefore does not hold a vested interest in the gift and has no immediate entitlement.

The courts have upheld wills drafted in this way, making this a good strategy for those who would prefer that their children do not inherit wealth before they are ready.Diagram showing how a contingent gift works - i.e. putting a condition in place to send money only if a condition is met (reaching age 25)

To delay inheritance requires careful drafting

An experienced lawyer is needed to draft a clause which contemplates a contingent interest.

You must also take care to ensure that the interest granted under your Will isn’t construed as a “vested” interest (i.e. your child will definitely inherit as opposed to they might inherit).

If this is to occur your child can challenge your Will to inherit as soon as they turn 18, and not when you desire them to.

It is important to ensure your Will reflects your wishes as there could be other consequences of creating a contingent interest without a lawyer’s advice.

 

Still have questions about delay inheritance? Contact us today

Our Estate Planning team can assist you in drafting your Will to reflect contingent interest and/or vested interest. Speak with our client engagement team today on (07) 3252 0011 or email enquiry@corneyandlind.com.au for an appointment today.