How is property acquired after separation treated? Read on to find out.
The Australian Bureau of statistics records that the average length of a marriage to separation in Australia, is currently 8.4 years, whereas the average length of a marriage to divorce in Australia is currently 12 years.
This means that the average person is waiting 3.6 years after they separate to get divorced, when only a one year separation is required before an application for divorce can be made to the Federal Circuit Court.
Parties are not expected to go into a state of suspended economic animation after separation and until they do a formal property settlement. Bank accounts will continue to go up/or down, superannuation may accumulate, properties will increase in value, mortgages may be drawn down upon, or perhaps an inheritance or other large sum of money is received by one party.
This raises a very common issue, how is property acquired after separation treated by the court?
It is a common misunderstanding that assets acquired after separation will be excluded from the property pool to be divided between the parties.
The Law: Property acquired after separation
The Court retains discretion as to how to treat property acquired after separation.
The Court is required to consider all property of the parties which exists at the time of the hearing, regardless of when those assets are acquired and all such property may be the subject of an order by the court. How property acquired after separation is treated, that is, whether it is included amongst the property to be divided between the parties or dealt with separately, is at the court’s discretion.
This issue was dealt with in the recent case of Calvin & McTier [2017] FamCAFC 125.
Case Study: Calvin & McTier [2017] FamCAFC 125
In Calvin & McTier, the Full Court of the Family Court heard an Appeal by the husband who argued that an inheritance received 4 years after separation should not be included in the property to be divided between him and his ex-wife.
The parties were married for 8 years and separated in 2011. There was one child who was 5 years old at the time of separation who spent equal time with them.
In 2014, the Husband received an inheritance from his father’s estate.
The Husband argued that the post separation inheritance should be excluded from the property pool to be divided between the parties.
The Trial Judge found that the net value of the assets to be divided between the parties was $1.3M. The Trial Judge treated the inheritance of $430,686 which remained at the time of the hearing, as part of that pool, which accounted for 32% of the net assets.
The contributions of the parties to that property pool were found to be equal save for in relation to the Husband’s inheritance and also initial contributions the Husband made to the property pool of $580,000 by way of real estate, a car, shares and some superannuation.
The contributions of the parties were assessed by the trial judge as 75%/25% in favour of the Husband and a 10% adjustment was made in favour of the wife for future needs, namely her lower income earning capacity, so that the net division of the property ordered by the court was 65%/35% in favour of the Husband.
The Husband appealed this decision.
The central issue on appeal was whether the Trial Judge erred by including the husband’s post separation inheritance within the parties property pool available for division.
The Husband argued that his inheritance received 4 years after separation should not be included in the pool because of the lack of connection between the inheritance and the parties relationship. This argument was unsuccessful.
The Full Court made clear that the court is required to consider all property held by the parties at the time of the Hearing, regardless of when particular assets are acquired.
The Full Court concluded that the Court retains discretion as to how to approach the treatment of property acquired after separation, i.e. the trial judge could have included the inheritance amongst the property to be divided or dealt with it separately. Relevantly, it was not asserted by the Husband’s on appeal that the inclusion of the inheritance in the property pool for division lead to an end result, after consideration of future needs factors, which was not just and equitable.
Other cases: Property acquired after separation
The Full Court have approved this decision in two other cases, Holland & Holland [2017] FamCAFC 166 and Widmann & Widmann [2017] FamCAFC 602
In the case of Holland & Holland, the Husband received an inheritance 5 years after separation of $715,000. The Trial judge excluded the inheritance from the pool and treated it as a “financial resource” rather than as part of the property pool to be divided between the parties. The Wife appealed and the Full Court granted an appeal, making clear that it is wrong as a matter of principle to refer to any existing legal or equitable interest of the parties as ‘excluded’ from consideration by the court in an application for property settlement.
What have we learnt re property acquired after separation?
These cases illustrate the importance of finalising your financial matters with your ex partner as soon as possible after separation, to avoid after acquired property being the subject of an application for property settlement by your ex-partner.
If you would like legal advice on your particular situation, contact our experienced family law team.
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