I’m separating from my partner, what counts as property of our relationship?
Posted on May 27th, 2019
Previously we have discussed in general terms how a separated couple may go about dividing the property of their relationship. The first step in this process is to work out what the assets and liabilities of the relationship are. Only after the assets and liabilities of the relationship are determined, can a couple discuss how to fairly divide them.
There is often misunderstanding by a lot of people as to what exactly counts as an asset or liability of a relationship. Negotiations can be hindered by one person wrongly attempting to exclude an asset, because it is not in joint names, or by one party failing to appreciate that the debts must also be paid.
Not all assets and liabilities will be in both names. This may be because the property was owned prior to the relationship commencing, or because the couple have received legal or financial advice to structure their assets and liabilities in a particular way. There may also be assets or liabilities held in company names or Trusts instead of individual names.
If you are the spouse who doesn’t have much in your name, you may be worried that by leaving, you walk away with nothing. This is not true.
Under the Family Law Act, property of the relationship includes any property or debt, whether it is in joint names or sole names. It does not matter if property was owned before the relationship, acquired during the relationship or acquired after the relationship. If the property exists during settlement negotiations, it is a marital asset.
This means that houses, superannuation, bank accounts, cars and even businesses are all considered marital property. It can include property acquired after separation, particularly if marital property was used, sold or exchanged to acquire it. For example, after separation, one spouse may trade in an existing car to obtain a new vehicle. The new car is included in the assets and liabilities of the relationship, even though it was purchased after separation.
If there are Trusts or Companies controlled by one or both of the spouses, the property owned by these Trusts or Companies is usually also marital property. Whether Company or Trust property is marital property can be complex and it is best to obtain legal advice on this point.
Confusion sometimes arises because people forget to include the debts of the relationship. When dividing marital property, a debt either needs to be paid or one of the spouses needs to take responsibility for the debt.
For example, if a couple own a house that is subject to a mortgage, the true value of the house is the equity in the property, not what it will sell for. If the house is being sold, the mortgage must first be paid out and then the couple decide how to split any profit.
If one party wishes to keep the house, they will need to be able to refinance the mortgage into their own name. In this situation, the party keeping the house doesn’t simply gain a house – that party also acquires the sole responsibility of the mortgage debt.
If there is a doubt as to a true value of an asset, or what has occurred to an asset after separation, the parties may exchange ‘Disclosure’. Disclosure is the proof of the existence and value of an asset or liability and can include bank statements, superannuation statements, loan documentation, appraisals and valuations.
Once both parties have agreed what the assets and liabilities are, and their precise values, they can then negotiate as to what would be a fair and equitable division of their marital assets.
Stacey is a Solicitor of the Supreme Court of Queensland and the High Court of Australia. Stacey was admitted as a solicitor in 2002 and relocated to Gladstone in 2003 where she has remained working as a solicitor in the local area as well as being involved with the Community Legal Program and volunteering her time and legal expertise with not for profit organisations.
Stacey has experience primarily in Criminal Law, Wills and Estates and Family Law. Stacey regularly appears as an advocate before the Court and takes pride in providing grounded, practical advice to her clients.