Negotiating a fair property settlement can be a tricky business. You’ll be balancing the need to look after your own interests, with the equally important goal of maintaining an amicable relationship (especially if you’re going to be co-parenting after separation). Add into the mix the fact that separation inevitably results in a reduced financial position for both people, and you’ve got a lot of potential for stress and conflict.
Following these steps can help you chart a peaceful and affordable path through the process.
Stage 1 – Checking if you need to protect your assets
If you have been in a relationship where valuable assets are held in your spouse or partner’s sole name (rather than being owned jointly), or if there are loans secured against the assets with large redraw facilities, then you might need to take some preliminary steps to make sure that it isn’t possible for the other person to dispose of the assets (or increase the debts) without your knowledge or consent. If this is your situation then it would be prudent to check in with a lawyer early in the process to see if protective action is needed. It might be as simple as asking the bank not to permit redraws of a loan without joint signatures, or it might be more complicated. Taking actions like this can make it harder to keep things amicable though, so ask the lawyer for advice about how to communicate with the other person about any steps you need to take.
Stage 2 – Gathering information and ideas
This stage has a got a few parts – but it doesn’t matter what order you do them in. Engaging me during this stage can help to keep you on a peaceful path. I will help you share this information with each other in a constructive way, and I’ll draw the information together in a form that will let the lawyers cut to the chase when you’re getting legal advice later on. I can also give you advice about where you need to get more detail, and how to go about finding any extra information.
Thinking about the principles you want to guide your property settlement decisions
If a Judge ends up having to make a decision about your property settlement then the Judge will be applying the rules and principles set out in the Family Law Act. You might think that approach is a good way to go about making your decisions. But the great thing about mediation is that you don’t have to approach things the way a Court would. If the two of you want to use different values and principles to guide your decision-making, then you can. So have a think about what you think is important in making these decisions.
Working out what there is to be divided
To make decisions about how to divide up your assets, liabilities and superannuation entitlements you’ll obviously need to know, as a first step, what there is to be divided. There is an obligation, under the Family Law Act, to make ‘full and frank disclosure’ to each other when you are working out your property settlement – which means you’re going to need to make sure that both of you know about all the assets, liabilities and superannuation entitlements you each have. It doesn’t matter whose name they are in or when they were acquired – if you have them now, they need to be disclosed. You’ll also need to start working out values for all these items. Some assets, liabilities and superannuation entitlements are easier to value than others. If I’m working with you as a mediator at this point I can give you some guidance about where and how to obtain valuations.
Identifying your financial history and likely financial futures
Your obligation to make ‘full and frank disclosure’ extends to sharing information with each other about your likely financial futures, and making sure you are on the same page in terms of your knowledge of your financial history.
Start piecing this together by thinking about the contributions you’ve each made during your relationship. What are the financial contributions you’ve each made through earning income? And what non-financial contributions have you each made through running your joint home and caring for children? Have there been any large lump sums that have come in during the relationship such as inheritances or compensation payments? And what did you each own and owe (including superannuation entitlements) at the beginning of the relationship? Don’t worry about being too specific at this point – for most people you only need broad information about these issues.
And now have a think about the future – what’s likely to lie ahead for each of you in terms of income earning and financial responsibilities. How do your current incomes compare – and how much capacity do you each have to sustain or increase your income? Is one person going to have primary responsibility for caring for your children? Are either of you expecting to receive large lump sums in the future or do either of you have any unusual financial resources, such as being a beneficiary under a trust? Do either of you have any health conditions that are likely to be very expensive to treat, or that are likely to limit your capacity to earn an income in the future? As with the financial history, you probably won’t need detailed information – and you can always find out the detail later, if it is needed.
Finding out your borrowing capacity
It is common, as part of a property settlement, for one person to retain the home a family have been living in. Usually this requires that person to take over an existing home loan and make a payment to the other person (which in practical terms usually means increasing the size of the home loan). If this is something that you might want to do then it will be important to know how much money you would be able to borrow. A chat with your bank, or a mortgage broker, will give you this information.
Stage 3 – Investigating your property settlement entitlements
Once you’ve gathered together all the relevant information you’ll be ready to find out what your ‘entitlements’ are – or to put it another way, what a Judge would be likely to decide, if you end up needing a Judge to make a decision.
Even if you think you’re going to be able to agree on a settlement, it is important to get this advice because when it comes time to formalise your property settlement you’ll have difficulty getting it approved if it is too far outside the ballpark of what a Court would decide. Knowing the boundaries of the ballpark will be important for your next steps. It’s also important for you each to know what the alternative to a negotiated agreement looks like.
In this step of the process you and the other person will need to see separate lawyers, because lawyers are only allowed to provide advice to one party. This can sometimes increase conflict though, because the lawyers will base their advice on the facts that are presented to them – and often each person will tell the story a little differently. If you have engaged me to help during Stage 2 then you will be able to take an agreed document to your lawyers so they can base their advice on the same set of facts.
Stage 4 – Making property settlement decisions
Now that you’re armed with information, and legal advice, you can start making decisions. This is a great point to meet with me for further mediation. I can help you share ideas and proposals in a productive way. I’ll also keep track of the information – making sure you can see clearly what the practical impact of different proposals will be so that you can make an informed decision.
Make a decision based on your principles
Remember how in Stage 2 you thought about the principles you want to guide your decision-making? Now is the time to revisit those thoughts because it is those values and goals that should guide your decision-making.
Compare your decision to your entitlements
Once you’ve come up with a plan it will be important to compare your tentative settlement to the advice your lawyers gave you about what a Court would be likely to do. If the agreement you have come to is outside the ballpark of what a Court would order then you might want to adjust your plan to bring it more in line with each of your legal entitlements.
Stage 5 – Formalising your property settlement agreement
Once you’ve got an agreement the next step is to formalise that agreement – that is, record it in writing in a way that ensures the agreement can be enforced if one of you doesn’t follow through. Formalising your agreement is also important as a way of ensuring that your settlement really is final, and to make sure that you are eligible for relevant tax exemptions (especially exemption from stamp duty).
There are two options – Consent Orders and Financial Agreements. Most times Consent Orders will be the easiest and cheapest option, but if you’ve reached an agreement that is well outside the Court’s ballpark then you might need to consider a Financial Agreement.
Most times Consent Orders are drafted by a lawyer acting for one of the parties. Another option is a ‘prepare your own separation agreement’ service such as SeparateTogether. The Family Law Courts also have a DIY kit to assist you with drafting your own Consent Orders. If you wish to use a Financial Agreement then you will definitely need to engage a lawyer to draft the document for you.
Once you have a draft of your Consent Order documents you’ll each need to get a lawyer’s advice about whether it is in your interests to sign the documents. If your agreement involves the ‘splitting’ of superannuation entitlements (that is, one of you getting some of the other person’s superannuation) then you’ll also need to send a copy of your documents to the Trustee of the superannuation fund to make sure they don’t have any concerns about the agreement. It’s very unusual for the superannuation trustee to object, provided the documents are drafted properly.
Stage 6 – Putting your property settlement agreement into action
Once the Court has approved your Consent Orders (or once you have both signed your Financial Agreement if you are going that way) it will be time to put your agreement into action.
The Consent Orders will provide timeframes for each of the steps to be taken. Depending upon the complexity of your agreement you might want to put this in the hands of your lawyers, to make sure all the steps happen when they need to. This is particularly important if your agreement involves the transfer of one or more real estate properties, especially if there are mortgages and home loans attached to the properties.