The ‘Four Step Process’
in Family Law
The Family Law Act requires a divorced couple to apply for property settlement or maintenance within 12 months of their divorce while de-facto couples have two years after their separation to apply.
Couples who have had a breakdown of relationship are required to genuinely try and reach an agreement through Consent Orders before undergoing Court proceedings. We always recommend consulting with a family lawyer in either of these situations so you are best prepared with all the information and advice available to you.
Essentially the Family Law Act allows the court to make orders “as it considers appropriate to change the interests of the parties in property”. In determining what is appropriate a four step property settlement process is applied. These steps are outlined in detail below.
The first step of the four step process in family law is to identify and value the assets, liabilities and financial resources of both parties. If you cannot agree on values, it is common to ask an independent valuer to provide evidence of value.
These include all assets the parties are beneficially entitled to whether they be in joint names, sole names, or held jointly with a third party or through trusts or corporations.
Assets are things such as real estate, furniture, vehicles, jewellery but can be intangible property like the good will of a business.
All assets of each party are taken into consideration, regardless of whether they were acquired before or during the marriage or after the separation.
You also look at resources such as anticipated inheritance or investments and royalties.
Liabilities are forms of debt such as credit cards, outstanding finance on loans and mortgage owing on the family home.
Step two is to look at the contributions towards the marriage or de facto relationship made by each of the parties including:
- Financial contributions. This category can be broken into three sub-categories:
- initial contributions;
The assets and liabilities that each party had when they started living together.
- contributions made during the relationship;
financial contributions made or received (for example and inheritance or gift from parents) by the parties during the relationship.
- post-separation contributions.
Financial contributions made for the benefit of the relationship/family after the parties had separated for example continuing to pay a mortgage over a home occupied by the other party.
- initial contributions;
- Non-financial contributions
This category includes contributions such as physically labouring on home renovations which increases the value of the home.
- Homemaking and parenting contributions.
The law does not give more or less weight to this type of contribution than to any other type. For example, one party could stay at home and look after the children and house while the other goes out and earns $200,000 per annum. The court will consider such contributions as being equal as each party was undertaking their role for the benefit of the family. The employed party could not do their job if the other party was not looking after the young children.
All types of contributions can be made by or on behalf of a party. For example, one party’s parents may have provided money towards the purchase of a home or physically laboured on that home to increase its value.
The third step is to decide whether an adjustment should be made because one of you has greater needs than the other by virtue of factors such as the care of young children, lower income earning capacity, or one party having more financial resources than the other.
Other concerns that are factored into the decision making are age, health, and financial circumstances of any new relationship.
The final step in the 4 Step Process is to divide the ‘property pool’ and decide which party gets what and then to check that the proposed orders are just and equitable in all the circumstances.
A very important element of the ‘Four Step Process’ to note is that full and frank disclosure about all financial circumstances is required from both parties and proof will need to be provided. You will need documents of group certificates, taxation returns, personal and credit card statements, share portfolio valuations and superannuation statements.
Remember, the Court will not take into consideration the reason for or who is at fault for the breakdown of the marriage or de facto relationship.
We understand that dealing with the property settlement process during such an emotional time can be challenging and complex. If you are looking for a family lawyer in Newcastle, NSW to help you through this time then come visit us or request an online consultation from anywhere in Australia..