We're fierce advocates of striving to obtain a property settlement by consent and without going to Court. We feel the best way to make the property settlement legally binding is through a Consent Order – it's an Order of the Court, but no-one goes to Court.
With the substance and clauses of the Consent Order, the old adage 'the Devil's in the detail', is more than apt.
But what does this mean? What are the details you should be considering, looking out for, and making sure are being covered in the Consent Orders?
We intend to look into this with you, over a multi-part series of discussions. Today, let's consider some of the important ones when it comes to the property pool available for division between the parties —
Property Pool?
- The property pool is the term we use to describe the assets, superannuation and liabilities of the parties that are to be divided as part of the property settlement
- Assets include, but are not limited to, the house, cars, furniture and home contents, bank accounts, shares, businesses, antiques, artwork and similar
- Liabilities include the mortgage, credit cards, personal loans, outstanding tax, HECS debts and similar
- The goal, in essence, it to arrive at an agreed net property pool value, both in terms of the items contained within it, and the values ascribed to those items.
- It can be a simple and straightforward process, or, it can be difficult, complex and time consuming. A lot will depend on the attitude and conduct of the parties, the volume and complexity of the items in the property pool, and the time that has elapsed since separation, to name a few
What's involved?
- As with nearly everything in Family Law, there's a process. The below sets it out in general terms.
- An accounting of all the assets, superannuation and liabilities should take place firstly. A good document to start with is by completing a Family Law financial statement. This can serve as a baseline document to gather all the information in one source document.
- The nature and value of the property pool should be current, unless otherwise agreed. It can include, for example, assets that are no longer there, under the label 'addbacks'. For example, a party may have sold a car and used the proceeds of sale – that asset is no longer there, but would be described as something like 'proceeds of sale of Toyota – addback $10,000'
- Sometimes an asset can be owned with 3rd parties. A house could be owned 75% by the parties, and the other 25% is owned by a party's parents, or something of that nature. In that case, for Family Law property pool purposes, it would be characterised as the parties 75% interest in the home, and the value would be 75% of what the current market value of the home is.
- Ascribing values is very important. It is almost always current market value. This is not insured, replacement, new or bank value. Agreement as to value can be reached, or valuation reports can be prepared, under joint instructions, with a suitably qualified family law valuer.
- Businesses, Trusts and other entities are usually subject to valuation reports, as they are complex and difficult for ordinary people to understand, let alone make informed decisions as to what the value may be.
- It is crucial as well to engage in the document disclosure process too whilst considering and ascertaining the property pool. This essentially is an exchange of financial documents, including bank statements, receipts, invoices, balance statements and similar. These documents can serve to verify nature and value
- Sometimes, the document disclosure process must take place for the property pool to be ascertained. This is typical where for example a business is to be valued, and in order to do so, the party who runs the business needs to disclose the business's financial documents.
- Accuracy, precision and frankness is required with setting out the property pool. The property pool is set out in the Consent Order documents and is utilized as the baseline for calculating entitlement adjustments and payments of consideration.
Some other things to consider
- Collating the property pool is a good time to think about what you would like to receive from the property pool as part of the property settlement.
- A party may wish to look at the option of having the home transferred to them. This will inform the party if they need to make enquiries with a mortgage broker to ascertain borrowing capacity to refinance the mortgage and 'pay out' the other party.
- The process to can serve to implement a deep dive of a parties finances and financial landscape. In doing so, it can serve to demonstrate a need to obtain advice from a financial planner or accountant so as to reconcile current finances and recalibrate the future financial landscape post separation and post property settlement.
The above discussion covers only some of the requirements and things you need to consider and implement.
Please carefully note – this is general information only and not intended nor to be construed as legal advice – if you need help with making sure your Orders are done right, or wish to talk about superannuation splitting, get in touch with our Family Law team.
Next time, join us for a discussion on how we set out in Consent Orders the way the 'property pool', is divided in the Consent Orders according to the agreement that is reached by the parties.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.