When couples separate one of the key aspects is financial separation, which involves the division of the assets between the parties. Technology plays an important part in this area with the searching and identifying of the assets that were accumulated during the partnership. It does happen often that one party to a relationship breakdown will deliberately attempt to make assets disappear. Naturally, this conduct is totally unacceptable, as well as being completely dishonest. However, no matter which way an asset is made to disappear, there will always be a digital trail to follow.
The first element with financial separation is to determine what is the property that should be part of the asset pool. The Family Law Act 1975 under section 4(1) has defined property as, “property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.” Another way of explaining, is that property is both real and personal, and includes choses in action.
Examples of property that should be included in the asset pool are real estate, shares, partnership in a business even if it is not immediately transferrable, damages on trust for a sole beneficiary, superannuation, (WA treats super differently though) debts that are owed to parties of the relationship. So all property purchased before, during or after the relationship, including financial entitlements are to be added to the asset pool for the financial separation.
Where there is an expectation of receiving a benefit in the future and it is not definite that the party will receive that benefit, then this proposed benefit, will not be classed as property of the asset pool for division.
When the court assesses the value of the property, it firstly looks at the total value of the asset pool less the liabilities, which then gives a net figure, which becomes the divisional amount for financial separation.
If assets have been disposed of where they should have been available for distribution, these assets may be taken into account by the court when final property orders are made, which means adjustments could occur to one party as to the divisional value of the asset pool. Notional add backs are a discretionary matter and will be dependent on the circumstance of each item.
Disputes arising between separating parties is common, especially in matters of property division. One of these issues that regularly arise is the claim that one party wasted money, which is called the ‘wastage argument’. In the Marriage of Kiwaliw (1981) the court said that both parties should share the wastage equally if it was incurred during the relationship. However, the court also said that where one party embarked on a path to reduce or minimise the effective value of the asset pool, or they acted recklessly, negligently, or wantonly with the assets to reduce the value of the asset pool, this will be taken into account against that party with the division of the assets.
One of the challenges with financial separation is the obligation on both parties to provide full and frank disclosure of their total financial circumstance, whether it includes selling the car, house or shares, disclosure is a fundamental element to reaching a just and equitable settlement between the parties. Where a party has acted with deliberate non-disclosure, there are serious and dire consequences if proceedings are before the court, which includes being found guilty of contempt and making an adverse order against that party, which bluntly means that party’s division of the asset split being adjusted accordingly.
Our society is built upon the standard of beliefs of what is right and wrong, and disappointingly, when relationships breakdown, it is common for moral conduct towards one another to be lost. So always take that wise step and get that legal advice to protect your legal rights and interests.
legal advice is required please contact: John Melis at Legal AU Pty Ltd (03) 9999 7799 www.legalau.com
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