One of the important things that I have learnt over the years is that it is best to sort out your property settlement as soon as possible. This is for many reasons, including:
- It is best to get on with life.
- As time passes it can be harder to obtain evidence, whether by document or by recollection of events.
- The financial picture changes…and this may be to your detriment.
It is the changing financial picture that I will focus on.
Clients often think that the pool of assets to be divided will be assessed as at separation.
Wrong! The court will determine the pool of assets as it exists at the date of the hearing.
So, if your superannuation was valued at $250,000 at separation but at the hearing is valued at $350,000 then the figure the court will take into account is $350,000. If your savings have increased then it is the increased current value which will be taken into account.
In dividing the property, the court will take into account the contributions made by each party. This will include post separation contributions. If one party has increased the value of the property since separation they will argue that their contribution means that they should receive a larger share in the property settlement. But will it be as simple as this? Maybe they are ignoring contributions made by the other party.
The 2015 case of Trask & Westlake was interesting on this point. The following is a brief overview of the relevant parts of the case:
- The parties separated in February 2009.
- They had 4 children (15, 13, 11 & 9).
- The husband had been the main income earner. He earned a high income.
- The wife had been primarily responsible for raising the children & doing homemaking duties.
- Post separation the husband obtained a new job with a very high income. His taxable income in 2010 was over $2m, in 2011 it was over $3.4m , in 2012 it was over $1m. In addition, he received further sums of over $2.5m from his employment and by subsequent retrenchment from the company that he worked for.
- Post separation the wife continued to primarily care for the children.
- The total net value of the property was over $7m. This had been increased by the husband’s post separation earnings.
- The husband argued that he had made a greater post separation contribution.
- The trial judge looked at contributions to the point of separation and post separation.
- He found that the parties had made equal contributions to the point of separation.
- In terms of the post separation contributions, the trial judge found that the wife had made significant indirect financial contributions and a significant contribution to the welfare of the children. He found that wife had contributed to the husband’s ability to be employed in his post separation job. He took the view that post separation the parties continued in the roles that they had during the relationship. He found that the parties had made equal contributions post separation.
- Therefore, the trial judge assessed the overall contributions made by the parties to be equal.
- The trial judge made a 10% adjustment in favour of the wife for the husband’s greater income earning capacity. The result being that the property was divided 60% to the wife and 40% to the husband.
- The husband appealed to the Full Court on both the assessment of contributions and the adjustment due to the husband’s greater earning capacity. The Full Court rejected the husband’s appeal on both points.
If the matter had been finalised in 2009 then the property to be divided would have been that which existed at 2009. Quite possibly the division would have been 60% to the wife and 40% to the husband. But the husband would have retained the build up in property flowing from his high income.
The moral of the story…get on and sort out your property as soon as possible…particularly if you are the person increasing the value of the property! Once the matter is finalised you will be increasing the value of your property, not increasing the value of property to be divided in a property settlement.
by Alan Wright