Financial settlement after separation is also referred to as property settlement. This is the process of dividing an ex-couple’s assets and liabilities. This ensures that both parties reach a fair and just division of property considering each partner’s contributions.
It’s generally recommended to negotiate and reach an agreement with your former partner outside of court. This is usually cheaper, faster, and less stressful. Once you have an agreement, you can formalise it through Consent Orders or a Binding Financial Agreement (BFA).
There are time limits for applying for a property settlement through the court. For married couples, it’s within 12 months of finalising a divorce, and for de facto couples, it’s within 2 years of separation. Read on to learn more about financial settlement after separation.
Financial Settlement After Separation: Related Finances
Separation can trigger financial worries due to a potential loss of shared income, increased expenses in maintaining separate households, dealing with joint debts, and disrupted savings plans. You may even feel a sense of financial dependence especially if your ex-partner contributed most to your financial obligations as a couple. Here are three finances that you may need to watch out for after separation:
1. Property Settlement
In the context of dividing finances after separation, property refers to all the assets and liabilities (debts) that you and your ex-partner own. This is the case regardless of whether they are in one name, both names, and seemingly separate from the relationship. Here are some examples of property:
- Real Estate: This includes your family home, investment properties, and any land you or your ex own.
- Financial Resources and Assets: This covers cash in checking and savings accounts, investment accounts (stocks, bonds, mutual funds), and any business ownership interests.
- Superannuation: Superannuation is a retirement savings plan in Australia. It’s considered property and can be divided during a settlement.
- Valuable Possessions: This includes things like jewellery, artwork, furniture, and vehicles.
- Debts: Debts like mortgages, personal loans, and credit card debt are also considered property and will be factored into the division.
2. Maintenance Payments (Spousal or De Facto Relationship)
This is another type of financial settlement after separation that may require one partner to provide financial support to the other. However, this is not automatic. The court awards spousal maintenance based on specific criteria:
- Caring for Children Under 18: A parent with primary care of children may receive maintenance.
- Physical/Mental Incapacity: If a partner is unable to work due to a disability, they might be eligible for maintenance.
- Other Adequate Reasons: In rare cases, other circumstances like caring for an adult child with a disability could justify maintenance.
Maintenance is separate from property settlement, but the court considers it when determining future needs for dividing assets. Moreover, maintenance payments can be temporary or ongoing, depending on the circumstances. Payments may stop if the receiving partner’s financial situation improves or their circumstances change (e.g., remarriage).
3. Child Support
Child support is a type of financial settlement after separation that requires providing financial support for children. It’s calculated by the Department of Human Services (DHS) using a formula that considers:
- Number of Children: The more children, the higher the support amount.
- Children’s Ages: Age-related expenses are factored in.
- Parents’ Incomes: Higher-earning parents typically pay more.
- Childcare Arrangements: The time each parent spends with the children can impact the amount.
Key Points:
- Child support is separate from property settlement and maintenance.
- Both parents contribute to child support based on their income.
- The amount can be adjusted if circumstances change (e.g., income changes, new child).
Check out our factsheet for more information.
What Does the Family Court Say?
According to the Federal Circuit and Family Court of Australia, separating couples in Australia need to consider several financial matters:
- Superannuation: Dividing superannuation interests (retirement savings) might be part of the settlement.
- Bankruptcy: If one partner is bankrupt, the court can handle it during family law proceedings.
- Financial Support: Spousal or de facto maintenance might be awarded to a financially dependent partner.
- Child Support: Both parents contribute financially to support their children.
- Death of Ex-Partner: The court can only make financial orders if both partners were alive when the application was filed.
The Family Law Act guides how the court divides property and finances. There’s no set formula, but the decision is based on fairness considering:
- Assets and personal debts of both partners
- Direct financial contributions of each partner during the relationship
- Indirect financial contributions such as gifts or inheritances
- Non-financial contributions like childcare
- Each partner’s future needs
Financial Settlement After Separation: Helpful Tips
1. Open Communication is Key:
Despite the emotional strain, talk openly and honestly with your ex about finances. Transparency regarding income, assets, and debts builds trust and facilitates a fair outcome.
2. Consider Alternative Dispute Resolution (ADR):
ADR, like mediation or arbitration, can be a more cost-effective and less adversarial way to reach agreements compared to going to court. A neutral third party can guide discussions, manage emotions, and explore creative solutions.
3. Prioritise Children’s Needs (if applicable):
Ensure both parents contribute fairly to child support to prioritise your children’s well-being. Factor in long-term financial needs like education when discussing property division.
4. Seek Legal Advice When Needed:
Financial advisors can help you understand your individual financial situation and make informed decisions about dividing assets and managing your post-divorce finances. However, lawyers can ensure your rights are protected and a fair agreement is reached, especially in complex situations. Though financial advisors can be of great help, it’s recommended for couples to seek independent legal advice as well.
How Can We Help with Your Difficult Property Settlements?
Let’s face it. Divorce is never easy and the emotional turmoil that may follow. Moreover, both of you and your ex have obligations to divide may it be finances, property, or child custody. However, JB Solicitors can help with your difficult divorce matters and help you achieve a fair and equitable outcome. Our expertise in family law matters can help you with:
- Child custody schedules that focus on the child’s best interests
- Mediation services if ex-couples are willing to work around their divorce.
- Representation at court for more complex divorce cases
- Identify the best kind of division for property and finances during the property settlement phase.
- Formalising property settlement with a binding financial agreement
Contact us today if you need legal advice about financial settlement after separation and other property matters.
