That’s not fair! The truth about dividing your assets during a separation

What happens if you have separated from your partner, you are in the process of negotiating your property settlement and you win the lottery?

Surely, your former partner should not be entitled to any of your lottery wins. You were separated right?

Well, unfortunately the law may not be on your side with this one.

Or what if you have re-partnered and purchased a property together with your new partner. Surely, the property should be excluded from the settlement negotiations with your former partner.

Whilst it may seem logical the property would be, it is not necessarily the case in Family Law. As it stands, if the property exists and your name is on Title, it can be the subject of division in a property settlement claim.

The general rule in Family Law is that the Court will assess the value of your asset pool at the date of the hearing, which must include all your existing property interests. Therefore, if you happen to win the lottery and receive a large windfall of cash prior to the hearing date, you will be required to disclose it to the Court. Whether or not your former partner has a claim on any of your “winnings” is contingent upon the Court’s assessment of your respective contributions across the entirety of your relationship until the hearing date, and various other factors.

This means you could be separated from your partner for 5 years, 10 years or even 20 years, during which time you may have accumulated a lot of wealth and potentially acquired more assets, and the Court will want to know all about it. You will be asked to disclose all your existing assets, financial resources, and liabilities to the Court. This includes, but is not limited to, real estate, bank accounts, shares, investments, motor vehicles, boats, and superannuation, as well as interests in businesses, companies, partnerships, and trusts. You cannot opt to “exclude” a particular asset from consideration simply because it was acquired after separation. Because the property interest exists, it must be disclosed, and it will be up to the Court’s discretion as to how the property is treated.

The 2017 case of Calvin & McTier illustrates the Court’s approach. In this case, the Full Court considered an appeal by the Husband who argued that an inheritance he received around 4 years after separation (of which $430,686 was unspent), should not be included in the pool of assets. The Husband’s remaining inheritance represented approximately 32% of the $1.3 million asset pool. The parties had been married for 8 years before they separated in 2010 and were divorced in 2011. The parties had one child together who spent equal time with each parent. In 2014, the Husband received an inheritance from his Late father’s estate. The Wife commenced proceedings around 5 years after separation in 2015 and was granted leave by the Court under Section 44(3) of the Family Law Act to pursue a property settlement claim against the Husband.

The Husband tried to argue that his inheritance should be excluded from the pool of assets available for division, but he was unsuccessful. The Husband then appealed the Court’s decision and the central issue on appeal was whether the Trial Magistrate made an error by including the Husband’s post-separation inheritance in the asset pool. The Husband argued that the inheritance should not be included because there was no clear connection between the inheritance and the parties’ marriage. He argued that the mere fact that the parties were married was not sufficient to justify the Court bringing the inheritance into account. The Husband’s argument was unsuccessful in the Full Court and his appeal was dismissed. It was held that all of the property then held by the parties can be the subject of orders under Section 79 of the Family Law Act, regardless of when the particular assets were acquired.

Sounds unreasonable right?

In my years of practice, I have often heard clients say, “That’s just not fair” and “Why do they not capture everything at the date we separated?”

In my view, this is a very wise and fair suggestion. It could potentially avoid many arguments between former partners, as well as the endless exchanging of updated disclosure documents to verify one’s financial position years after separation. For this reason and others, it is recommended that you formalise your property settlement in a timely manner following separation. If you would like further information, or wish to pursue or formalise your property settlement, please call Nolan Lawyers on 02 8014 5885 and arrange a free consultation.