WHAT IS PROPERTY?
Almost everything that has a saleable value in the marketplace is property. That could range from real estate and shares to obscure antiques and collectables. As long as there is a buyer prepared to pay money and, therefore, attribute value to the item being sold, then it is property.
A few things are not property. An entitlement in a discretionary trust where the beneficiary has no ownership or control over the trust but is merely at the mercy of the discretion of the Trustee is not property but may constitute a resource.
Similarly, entitlement to accumulated benefits in a superannuation fund are not property but a financial resource. Nevertheless, given changes in the Family Law Act 1975 and Family Law (Superannuation) Regulations 2001 to enable such resources to be split as long as there are Orders made by the Court or a valid Financial Agreement and the Trustee is given procedural fairness.
Most small businesses where goodwill attaches to the sole trader are not saleable and, therefore, not property.
It is important to understand what is and what is not property because identifying and valuing the property pool is the first step in negotiating or otherwise coming to an agreement or the Court determining an adjustment of property entitlements. See article on The Four Step Process.
THE FOUR STEP PROCESS
When negotiating, mediating or the Court deciding what is a fair division of property between a separated couple, there is a four step process that is undertaken. It is not an arithmetic formula that ends in a precise answer but, rather, a process designed to lead to a range of possible outcomes within which a property settlement would be considered “just and equitable”.
The first step is the identification and valuation of property and financial resources so that a net property pool can be identified as being available for division between the parties. This would include all property and financial resources including superannuation. If the property pool cannot be identified and/or valued there may be difficulties which prevent proper negotiations taking place. If property can be identified and the value agreed then negotiations can be simpler. If the value of some property cannot be agreed to, the parties can engage a single expert witness to value the property. See article entitled “Disputes About the Property Pool”.
The second step is for the parties to identify contributions made by each of the parties or on their behalf. Contributions can be financial and non-financial, direct and indirect, as a parent and/or in the capacity of homemaker. After the second step, there is a notional percentage division of property into which the third step, adjusting for “future needs factors” needs to be undertaken.
The third step is to assess what each party’s future needs may be. In this step, an analysis is undertaken as to the age, health, employment, income and earning capacity of each party as well as their financial dependents such as children of the relationship. Once the parties’ needs have been assessed, the notional adjustment of the property after the contributions step needs to take place. Generally speaking, the smaller the property pool the larger the adjustment for future needs and the larger the property pool the smaller the adjustment so much so that in cases with a very large property pool there is usually no adjustment for future needs factors.
The final step is to assess, having taken into account the property pool, the respective contributions of the parties and each of their future financial needs, whether the overall proposed adjustment is “just and equitable.”
Pearsons Lawyers
This is general advice only. Pearsons Lawyers have a team of specialist family lawyers who can provide timely and accurate advice on all matters that need to be dealt with following a separation including parenting and property matters. To arrange your free initial consultation contact Pearsons Lawyers today on 1300 699 688 and “know where you stand”.
