Splitting Assets in a Divorce or Separation
- August 1, 2022
- Posted by: admin
- Category: Family Law
Splitting Assets in a Divorce or Defacto Separation
Asset separation is one of the more complicated parts of divorce and de facto separation. Regardless of your marital status, splitting assets of a relationship can be made legally binding through three methods:
- Consent Orders from the Family Court, which are given after a joint application by both parties to the relationship;
- Property Orders from the Family Court, which are made after an interim or final hearing where there is a dispute between the parties; or
- Through a Binding Financial Agreement, which is a private agreement between you and your ex-partner which sets out who gets what assets.
What is the process of splitting assets during a divorce or de facto separation?
The first step is to communicate with your ex-partner about asset separation to see whether you can come to an agreement.
If you are able to come to an agreement about asset separation, then you have two choices to ensure that the agreement is legally binding:
- Apply jointly to the Family Court for Consent Orders; or
- Get a lawyer to draw up a Binding Financial Agreement as a private agreement finalising the asset split.
If you were married, you can do the above before or after getting a divorce in Tasmania.
If you are unable to communicate with your ex-partner, or you can’t agree, then you may have to apply to the Family Court to let the Court decide how your assets should be divided.
What assets can be split?
All property of the relationship can be dealt with following a separation. This includes all personal possessions, money in bank accounts, vehicles, shares, superannuation and even pets!
It’s common for accountants to recommend that a company be owned in a trust or that family assets be held as part of a family trust. While trust structures are generally used as a protection mechanism, trust assets may be considered part of the property pool of the relationship if it’s considered that the parties have control over the trust for their own benefit.
In certain circumstances, the Family Court can look behind a trust and may consider it as money of one of the parties. If you are concerned about money held in trust you should seek legal advice by calling us to discuss your circumstances.
What assets can’t be split?
There are no assets that are out of touch of an order of the Court. While you obviously can’t physically divide a car or a house (who literally wants half a car?), in situations where one party wants to keep a highly valued asset then they may be required to compensate the other party by giving them cash.
For example, if the only asset of the relationship is a house worth $500,000 and one person wants to keep the house, they will need to “pay out” the other person. This often requires one person to get a mortgage in order to pay out their ex-partner. If they can’t afford to do this then the Court may require the house to be sold and the proceeds will then be divided between the parties.
Can you protect specific assets during a separation?
The only way to protect assets in case of a separation is to enter into a Financial Agreement with your partner either before or during your relationship.
A Binding Financial Agreement (BFA) is an agreement which allows you to effectively “contract out” of the Family Court system and move assets outside of the Court’s jurisdiction. It can stop the court from deciding on specific issues such as superannuation splits or spousal maintenance. While there are still circumstances in which the Court will overturn a BFA (i.e. fraud or where they have not been properly entered into), a BFA is the only way to protect yourself from a family law claim over property.
A BFA can be entered into regardless of whether you are a de facto couple, married or a de facto couple that plan on getting married.
Does a prenup help?
In short, yes! “Prenup” or “prenuptial agreement” are American terms that have carried into Australia. The equivalent in Australia is a Binding Financial Agreement.
As noted above, it is the only way to legally protect assets before entering a relationship or getting married, or even by isolating that asset during the relationship or marriage, for example, if you inherit during the relationship you could enter into a Binding Financial Agreement.
“Can we just agree?” – Do you need Orders confirming the division of assets?
If you don’t have a lot of assets then you may not require Orders confirming the division of assets. We recommend Orders for 2 reasons:
- Orders or a BFA are the only way to legally close down any future claim that your ex-spouse may have.
This is important because the Court will consider the asset pool at the time of the hearing of the matter and not at the time of the separation.
This means that if you end up in Court 3 years after separation when you are in a better financial position, it is possible the Court will consider your assets as property that can still be divided between you and your ex-partner.
If you “just agree” with no orders and your ex-partner changes their mind later then they may still be able to take you to Court to get more;
- Where you have land or other property that has to be legally transferred. For example, where you own property together then you will need Orders or a BFA in order to be exempt from Stamp Duty on the transfer. Without Orders confirming that the transfer is due to a relationship breakdown, the State Revenue Office will consider that you have just sold the property and you will have to pay Stamp Duty.
Can I apply for property orders myself or do I need a lawyer?
While there are DIY kits available on the Court website, drafting orders to present to the Court can be difficult when you have no experience. We offer fixed fee options for obtaining consent orders or for sorting out your Binding Financial Agreement.
Where you are seeking consent orders and you need help from a lawyer, it is not unusual for one party to instruct a lawyer to draft the documents and for the parties to agree to share that lawyers costs. If you need assistance drafting consent orders then contact us to discuss how we can assist you with our fixed fee packages.