You and your spouse have most likely worked hard throughout your relationship to build up your assets. Whether those assets include a home, car, investments or superannuation - you want to make sure that when you move on from your marriage that you know what will happen to those assets. How will your marital assets be divided between you and your spouse?
The Courts generally adopt a four step process when making a decision in relation to the division of marital assets.
To identify and value the assets it is first necessary to work out what property will be included.
Property is defined broadly and includes:
- Cash
- Real property such as houses, units or land;
- Cars
- Boats, Caravans, Trailers
- Antiques
- Furniture
- Shares
- Superannuation
- Business Assets
Property liabilities may include:
- Mortgages
- Car Loans
- Personal Loans
- Credit Cards
- Income Tax Liabilities
- Other loans
Once it is determined what the marital assets are (often referred to as the 'property pool') then it is necessary to determine the value of those assets.
Parties may agree on what the value of the assets are but when they don't it is necessary to assess the value.
Working out the value of an asset will often depend on the type of asset but it is the 'fair market value' that is generally applied when determining an asset's value.
Determining the fair market value of houses and land can be achieved through the use of a licenced valuer. They will often write a report detailing the value of the asset based on supporting evidence (such as recent sales etc).
For cars, caravans and the like, valuations can be obtained from professional dealers who work in that industry. For example, a second-hand car dealership.
For other items such as cash or superannuation, statements from the financial institution or fund may be provided.
It should be noted that for items such as furniture it is not the insurance replacement value (or contents insurance value) that is used to calculate the value. Rather, it is the “fair market value” of the furniture in its current second-hand condition. A valuation may be obtained from a second hand furniture dealer to determine the value of each furniture item, particularly larger items if the parties are unable to agree.
As a general rule, a party seeking to include an item as an asset should produce evidence of its value. Formal valuations are preferred, where possible. Although obtaining valuations can be costly and time consuming, it ensures that incorrect values are not applied which may result in a party being short-changed.
This step requires an assessment of each party’s contribution to the acquisition, conservation and improvement of the property detailed above.
Contributions can include:
- Financial Contributions;
- Homemaker Contributions; and
- Non-Financial Contributions.
Financially contributions can include wages, inheritances received, monies had prior to the marriage etc. A party’s bank statements can often assist in showing this.
Homemaker contributions includes caring for the home or children, cleaning and all the day-to-day requirements of running a household.
Non-Financial contributions includes, for example, attending to repairs or renovations to the property such as to add value to the property.
Normally, a percentage will be allocated to each party based on their contributions.
As a general guide, if one partner is working full time and the other partner is caring for the children full time then their contributions will often be considered equal. Therefore, they will each have contributed 50%.
At this stage factors such as a party's:
- Age
- State of health
- Income or resources
- Physical or mental capacity
- Homemaker – are they caring for children under 18 years;
- Responsibilities to support another person
- Care for themselves or others etc.
- Standard of living etc. will be considered.
For example, if the Wife of young children cannot work because she has to stay home and care for those children then her future needs may be greater than the Husband’s needs if he is healthy and able to work full time.
At this stage, another percentage may be allocated to the parties. Using the above example, the Wife may be allocated a percentage in her favour because of her future needs. Each case is different and there is no set rule for applying this percentage. It will be determined on a case by case basis in accordance with the individual needs of the specific parties.
It should be noted that even where parties agree to divide their property that the Court may not accept that agreement if it does not consider that it is just and equitable. Often clients say that they have reached an agreement that the assets be divided 50/50 even where one party’s needs are less than the other. Such as where one party is not working because they are staying home to care for young children. Even though the parties may have agreed to this, the Courts will not accept such an agreement if it is not just and equitable and accordance with the Four Step process.