Archive for the ‘Family Law’ Category

Bankruptcy and family law proceedings

Dividing property after partners separate is generally stressful, with each party concerned about his or her financial future. The bankruptcy of one party adds a further dimension of complexity to a family law property settlement.

Even partners whose relationship is intact should seek urgent advice if one of them is facing bankruptcy or insolvency issues. In particular, the non-bankrupt party should take immediate action to protect his or her interests in assets.

This article provides an overview of bankruptcy laws, how property is usually divided after a relationship breaks down, and how the processes interact when one of the parties to a property settlement is bankrupt. Bankruptcy and family law are complex areas and the information in this article is general only. Parties should obtain professional advice relevant to their individual circumstances.

What happens when a person becomes bankrupt?

A person is considered bankrupt when he or she is unable to pay his or her debts. Apart from certain protected property, the bankrupt’s assets vest in an appointed trustee in bankruptcy who may sell those assets to satisfy the claims of creditors. Protected assets generally include clothing, certain personal possessions, tools of trade, a motor vehicle to a prescribed value, awards of compensation and superannuation and life policies.

The trustee controls the bankrupt’s financial affairs while the bankrupt is protected from being personally sued by creditors.

How is property divided after a relationship breakdown?

The division of property after a relationship breakdown generally requires a four-step process to:

  • identify the parties’ pool of assets available for distribution;
  • determine the parties’ respective financial and non-financial contributions;
  • consider the parties’ future needs; and
  • determine a split that is, in all the circumstances, just and equitable.

What happens when one of the parties to a property settlement is bankrupt?

When a relationship breaks down and one of the parties is bankrupt, the interplay of the Bankruptcy Act 1966 which regulates individual bankruptcy, and the Family Law Act 1975 which governs the division of property, must be considered.

The Family Law Act enables a person to apply for the alteration of property interests after the breakdown of a relationship, and specifically includes circumstances where property is vested in a trustee for bankruptcy if one of the partners is bankrupt.

This allows the Court to alter the interests of property that would otherwise vest in the trustee, enabling the non-bankrupt partner to claim an interest in vested assets for his or her benefit and / or the benefit of any dependants. The legal title to the property in such cases is irrelevant.

The interests in the family home of a non-bankrupt party may also be protected. The family home is generally not a protected asset and the bankrupt’s interest is available to a trustee to satisfy creditors. However, where legal title to a family home is held solely by a bankrupt, the Court may nevertheless conclude that the home is held jointly thereby protecting the interest of the non-bankrupt party.

A person affected by an order or proposed order such as a creditor, may apply to have it varied or set aside. In some circumstances, a trustee will apply to be joined as a party to the proceedings and to have orders set aside on grounds of fraud, duress or a failure to disclose relevant information. This could result in the recovery of certain assets to satisfy creditors.

The Court must balance the competing rights of the creditors and the non-bankrupt party and make orders that are just and equitable in the circumstances. It may take into account a range of factors including:

  • the non-bankrupt partner’s direct and indirect financial and non-financial contributions to the relationship;
  • the effect of a proposed order upon either party to the relationship;
  • the future needs of the non-bankrupt party including the responsibility for caring for children, employment status and health;
  • the effect any orders will have on creditors of the bankrupt person including whether the debt will be repaid in full.

The need to achieve a just and equitable outcome may result in the non-bankrupt partner and his or her dependants obtaining a share of certain assets that would otherwise be vested in the trustee, to the detriment of the creditors.

Key takeaways

  • The property of a bankrupt individual vests in the trustee in bankruptcy for distribution between creditors.

 

  • The ex-partner of a bankrupt person may pursue a property division despite the bankruptcy.

 

  • Court proceedings for a family law property settlement when one partner is bankrupt will generally be between the non-bankrupt party and the trustee in bankruptcy.

 

  • In such proceedings, the Court may be required to determine:

 

–        applications by the non-bankrupt party to restrain the trustee from dealing with certain property and / or distributing funds amongst creditors;

–        claims that property vested in the trustee and otherwise available to satisfy creditors should be altered for the benefit of the non-bankrupt partner;

–        claims that exempt property or property not vested in the trustee should be made available for distribution to creditors.

If you or your partner are facing insolvency issues, whether or not your relationship has ended, or is likely to end, you should obtain immediate legal advice.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

The duty of disclosure and family law property proceedings

The division of assets after couples have separated can be finalised by financial agreement, consent orders or proceedings in the Family Court.

The Family Law Act 1975 (Cth) requires parties to make genuine efforts to resolve disputes. Generally, parties must participate in dispute resolution, explore options for settlement and comply, as far as practicable, with the duty of full and frank disclosure.

These ‘pre-action procedures’ must be followed before commencing proceedings in the Family Court, the objectives being:

  • to encourage early disclosure through the exchange of information;
  • to minimise the potential for legal action by reaching an early settlement;
  • to construct a process to resolve a matter quickly and to limit costs; and
  • if proceedings are necessary, to assist in their efficient management by identifying the real issues in dispute.

What is the duty of disclosure?

Broadly, the duty of disclosure requires that the parties exchange information and documents (whether or not these are known to both parties) that are relevant to an issue in the case.

The disclosure obligations exist from the beginning of the matter and continue until the case is resolved. This means that a party must disclose when certain circumstances change or new information or documents come to that person’s attention.

Full financial disclosure is essential to enable a lawyer to properly advise a party on his or her rights and disclosure obligations must be followed even if the parties settle their financial affairs without going to Court.

Disclosure in property matters

The information and types of documents required to be disclosed in property matters will depend on the asset pool and the business or financial interests of the parties.

The Rules set out an exhaustive list of disclosure requirements. Compliance may be met by providing a statement of financial circumstances, producing certain documents and / or answering specific questions.

Generally, the types of disclosure documents required include:

  • all sources of earnings including income from paid employment and business interests, rental income and interest on shares and investments;
  • other financial resources;
  • financial interests whether existing or contingent, in property, including real estate and other assets;
  • details of property disposals (whether by sale, transfer, assignment or gift) made within 12 months before separating;
  • taxation returns and assessments;
  • superannuation details;
  • market valuations for certain assets, particularly if values are not agreed;
  • liabilities and contingent liabilities.

More exhaustive information is required if the parties have interests in a company, trust or partnership. The parties will need to provide balance sheets, profit and loss statements, business activity statements, recent annual returns, deeds and agreements.

Additionally, where there are matters in dispute, such as an assertion by one party of having made significantly greater financial contributions, then evidence to support those claims is required.

A practical approach

The duty of disclosure refers to ‘relevant’ matters and for compliance ‘as far as it is practicable’. Whilst this is not a mechanism for avoiding the disclosure obligations, it does foster a sensible and practical approach.

Disclosure is required so that an understanding of the parties’ asset pool can be ascertained. It need not extend to disclosure of information from third parties unless that person’s financial circumstances are relevant to the issues in dispute.

Matters that are common knowledge between the respective parties do not need exhaustive documentation. For example, a bank balance of say $200 need simply be noted without providing the past three years’ bank statements.

Locating, identifying and collating the necessary disclosure information can be onerous. Your lawyer will explain the extent of your obligations and provide guidance to assist you in meeting your obligations.

Risks of non-disclosure

Lack of disclosure and ongoing disputes regarding the parties’ financial circumstances will exacerbate settlement, add unnecessary legal and other costs, and risk depleting valuable resources.

Importantly, there are significant penalties that may be imposed by the Court for failing to disclose relevant information or attempting to mislead the other party.

A person failing to disclose a relevant document as required or providing a false or misleading document may result in that person:

  • being unable to rely on the document as evidence in proceedings;
  • having his or her matter dismissed or postponed;
  • having the Court attribute a value to an undisclosed asset (which is generally not in that party’s favour);
  • being found guilty of contempt, leading to fines or imprisonment;
  • being ordered to pay legal costs.

Conclusion

The parties to a family law property settlement have an obligation and ongoing requirement to be transparent with respect to their financial affairs.

The duty of disclosure ensures that the Court is fully informed of the parties’ financial position and is relevant whether or not a matter proceeds to Court.

This article is intended to provide general information only. You should obtain professional advice that is relevant to your circumstances before you undertake any course of action.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

What happens when your ex-partner squanders your assets

Unfortunately, many separations end in hostile disputes over money. A common situation when trying to resolve property matters is when one partner makes a considerable dent in the family finances by squandering assets or racking up additional debt.

A bitter ex-partner may go on a spending spree, ignorant of the consequences. Alternatively, he or she may have been reckless during the relationship either through risky business ventures, gambling or other addictions.

Whether the wastage has occurred before or after the relationship ends, the potential for a fair split of the assets after separation may seem flawed. Fortunately, the Family Court is empowered to use discretion to achieve a just outcome. These discretionary processes have traditionally included the concept of ‘add-backs’.

This article explains how a family law financial settlement may be dealt with when one party independently deals with property to the detriment of the other.

Dealing with property matters generally

It is first useful to outline the steps a Court takes to determine how property should be divided. The process involves:

  1. identifying the assets, liabilities and financial resources of the parties;
  2. assessing the parties’ respective financial and non-financial contributions;
  3. evaluating the parties’ future needs taking into account their relative earning capacities, state of health and the need of the primary carer of children to provide a suitable home;
  4. in all of the circumstances, making orders that are ‘just and equitable’.

The starting point is usually an equal distribution of assets before consideration of several other factors.

Notional property and add-backs

The Court’s approach to a financial settlement is discretionary, allowing it to consider the parties’ circumstances with the objective of providing an outcome that is fair and just.

Adding back property means including into the pool of assets a notional value for property or funds that have been wasted, exhausted or prematurely disposed of for the benefit of one party or a third party.

The ‘notional’ property will form part of the asset pool from which a division of property is made. The purpose is to bring back the value of assets that would otherwise have been available to both parties, had the other party not caused the asset to be depleted.

When will an add-back be appropriate?

The starting point is that assets accrued or losses sustained (whether jointly or individually) during the course of the marriage or relationship should be shared between the parties, although not necessarily, equally. However, in exceptional circumstances it is appropriate for the Court to deviate from this principle. Generally, add-backs will arise in the following circumstances:

  • losses incurred as a result of a party’s deliberate efforts to diminish or deplete the value of assets, such as a premature distribution of assets;
  • losses sustained by a party’s reckless, negligent or wanton conduct;
  • where a party has used joint funds to pay for his or her own legal costs.

Premature disposition of assets

Occasionally, a party deliberately sets out to diminish the matrimonial assets, making them unavailable for distribution. This may occur by selling or transferring property to a third party or making extravagant or lavish gifts.

To justify an add-back, the Court will need to assess the reasonableness of the expenditure in light of the surrounding circumstances, including an assessment of the overall asset pool and the amount spent. For example, in one case, the wife assisted her adult daughter by gifting $15,000 as a deposit to purchase a property. The Court considered that it was not unusual for parents to assist their children and, given the magnitude of the asset pool, it was unreasonable for that amount to be added back.

In another case the husband sold his taxi licence and vehicle, which had been used to operate a business throughout the course of the marriage. He benefited from the proceeds and the Court determined that the value of the funds received should form part of the asset pool for distribution between the parties on the basis that the wife had a legitimate interest in the taxi business.

Reckless conduct and waste

Money wasted on individual pursuits or gambling addictions during or after the relationship may be added back to the asset pool. The conduct of the spendthrift party will be relevant in determining such cases and the Court plays a discretionary role in deciding whether or not the losses should be borne individually or jointly. Considerations may include whether the person has an underlying illness, and his or her attempts to obtain help.

Adding back legal costs

Parties are required to fund their own legal costs and outstanding legal fees do not constitute a liability forming part of the asset pool.

Money taken from a joint account by one party to pay his or her legal fees may be subject to an add-back. This however is a matter for discretion and will depend on the particular circumstances – if the funds existed at the time of separation and both parties have an interest in them, then it is likely they would be added back. Conversely, if funds used to pay legal costs were sourced from a party’s own efforts or provided as a gift or loan post-separation, then it is unlikely these will be added back to the pool of assets.

Key points

  • Separating couples should share financial losses incurred during the relationship unless those losses result from one party’s negligence, recklessness or intentional conduct to reduce or deplete matrimonial assets.
  • Each case will turn on its merits and the entire circumstances of the expenditure is considered when assessing its reasonableness.
  • Funds existing at the time of separation and subsequently used for reasonably necessary living expenses are not added back to the asset pool.
  • Clear evidence is required of assets and expenditure before and after separation and separating parties should take care to record assets and liabilities at the time of separation and thereafter.

Conclusion

High Court cases such as Stanford v Stanford [2012] HCA 52 and Bevan v Bevan (2013) FLC 93-545 suggest that concepts of add-backs and notional property may have become outmoded and their application more the exception than the rule.

There is no guarantee that a dissipated asset will be notionally ‘returned’ to the asset pool on a dollar for dollar basis. However, and as confirmed in subsequent cases, the Family Court has discretion to adjust property interests by considering a myriad of factors and on a just and equitable basis. Such factors include circumstances where assets are purposely, negligently or recklessly depleted.

It is important to obtain good legal advice before or soon after you separate from your spouse or de facto partner. An experienced family lawyer can assist in preserving hard-earned assets, preventing wastage and maximising your chances of a fair property settlement.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

The importance of financial advice in a family law property settlement

Most property settlements are reached through negotiation, without the need to attend Court. Negotiations can be formally documented through a binding financial agreement or consent orders. As a last resort, the parties may need to initiate Court proceedings whereby orders will be made regarding the division of the parties’ property.

No matter how a property settlement is reached, it is important to be aware of the financial impact of the proposed agreement before finalising it. Family lawyers often recommend working with a financial advisor to ensure a property settlement delivers an optimum financial outcome for the client. We explain below some of the benefits in working collaboratively with a financial advisor and lawyer.

Identifying and classifying assets and liabilities

A financial advisor can help to properly identify, classify and evaluate the parties’ assets and liabilities, whether these are held jointly or individually. Assets can be held in various ways, whether through a trust, company or shares and it is important that a full portfolio of the asset pool is obtained. Only by presenting a complete picture of the parties’ financial position, might a fair and reasonable property settlement be negotiated.

In some circumstances, a financial advisor or lawyer will recommend that certain assets, such as business interests and company shares, be formally valued.

Recommending tax effective strategies

Understanding the tax implications of a proposed property settlement can have a significant impact on the net result for each party.

The retention, transfer or division of different types of assets can have different stamp duty and tax consequences.

A financial advisor can recommend strategies and structures for the division of assets to take advantage of duty concessions and tax exemptions or deferrals that are unique to family law property settlements. This may include recommending that a certain asset be retained or transferred. Depending on the stamp duty and tax consequences applicable to that class of asset, it may be more advantageous to retain one type of asset over another.

A financial advisor can also flag and calculate potential future CGT liabilities which is an important consideration when negotiating the division of property. Advice on transactions concerning companies and trusts may also play a significant part of the advisor’s role.

Advising on superannuation

If a superannuation split forms part of the proposed property division then you will either end up with more, or less in your superannuation account. This may require a reassessment and restructure of your retirement plans. A financial advisor can evaluate the net effect of a proposed superannuation split and assess future needs and contributions towards superannuation.

Assessing future needs and planning ahead

Most financial advisors have sound knowledge of family tax payments and child support and can assist in determining entitlements and / or obligations.

Your financial adviser can help implement strategies on how to get back on your feet, financially, after separation. This may include budgeting advice and money management strategies, recommending appropriate insurance to protect your income, managing and protecting assets, and developing plans to work towards your financial goals.

Estate planning and death benefits

Once a property settlement has been reached and finalised, a financial advisor and lawyer can work together to implement an effective estate plan in consideration of your new personal and financial circumstances.

They will identify the most tax-effective beneficiary for superannuation entitlements and death benefits and help structure your assets to ensure maximum protection against future family provision claims.

Conclusion

Separating couples are often anxious about their immediate and future financial needs and may seek assistance to achieve a fair and reasonable property settlement. In doing so, it is important to remember that lawyers provide legal advice and not financial advice. Including a financial advisor in your professional team can provide significant benefits when negotiating a property settlement.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Faster Court processes for small family law property cases

Dividing property after separation can be challenging and, while avoiding court is the preferred approach to finalise a property settlement, this is not always possible. Court proceedings can exhaust time and money. When the pool of assets is quite modest, the impact of excessive legal and court costs can put a significant dent in the value of the property a couple has worked hard to obtain.

To target these issues, the Government has introduced a Small Claims Property Pilot program to help parties with small asset pools reach a fair division of assets with minimal cost and without extensive delay, as is often the case for family law matters. Known as the Discrete Property List, the program has been implemented by the Federal Court registries in Brisbane, Parramatta, Adelaide and Melbourne.

The program commenced in January 2020 and will run for two years. Afterwards, its success will be assessed with the possibility of expansion into other regions and on a more permanent basis.

If you are separated with a net joint asset pool of $500,000 or less, you may be eligible to access the program and have your matter dealt with more efficiently and cost effectively by the Federal Court.

The Discrete Property List

The program forms part of the $98.4 million Women’s Economic Security Package (WESP) to fund services and initiatives aimed at supporting victims of family violence and resolving family law disputes.

Traditionally, apart from urgent matters, family law property cases progress through the court in the same manner and within the same timeframe irrespective of the size of the asset pool or complexity of issues involved. This approach has contributed to an excessive backlog of cases which could potentially be lifted by fast tracking some of the smaller, simpler matters.

The program deals with property related matters only, which are referred to as Priority Property Pools under $500,000 (PPP500) cases. A PPP500 case is one where:

  • the parties’ net property (including superannuation) is $500,000 or less; and
  • there are no entities owned or controlled by either party that will require valuation or expert investigation (for example, a family trust, company or self-managed superannuation fund); and
  • neither party is seeking orders for parenting or child support.

The objectives of the program are to:

  • fast-track and finalise simple property matters involving small asset pools at minimal expense for the parties involved;
  • reduce the current backlog of cases within the family law system and the waiting time for other matters;
  • assign a Magistrate to deal with smaller, less-complex matters while freeing up Judges to deal with more complex matters and children’s matters.

Processes and timeframes

The Federal Circuit Court has issued practice directions for parties involved in a PPP500 case. Rather than waiting to be heard by a Judge, matters in the Discrete Property List will, in the first instance be assigned to and case-managed by a Registrar.

In most cases, the matter will be dealt with exclusively by the assigned Registrar with an outcome anticipated within 90 days or the matter referred to a Judge for case management or listed for hearing.

The program fosters early dispute resolution and features intensive monitoring for compliance and exchange of documentation between the parties. To improve the potential outcome using these processes, there is close involvement to ensure cases are properly prepared before alternative dispute resolution takes place.

A PPP500 case will typically take the following path:

  • Proceedings are commenced by the parties filing an Initiating Application and a Financial Summary. Prior to the first court date, the case will be confirmed as a PPP500 and preliminary directions made by the Registrar in chambers for financial disclosure and the exchange of relevant documents, such as valuations and expert reports, between the parties.
  • On the first court date before the Registrar, and assuming the parties have exchanged the required financial information, a ‘balance sheet’ is settled and the parties may be referred to private mediation, a conciliation conference or Legal Aid conference.
  • Alternative Dispute Resolution may take place with a Registrar, external mediator or at a Legal Aid conference. Following, the parties may be in a position to settle the matter by consent, and in such cases, legally binding orders can be made.
  • If the matter does not settle, a second court date is arranged – factual issues are identified, the balance sheet is re-checked and settled, and the Registrar’s involvement comes to an end. The case is then referred to a Judge.
  • A procedural hearing is convened where issues are identified, and directions made for a final hearing. Parties may have the option to consent to a less adversarial hearing on the papers. If a traditional hearing is preferred, the parties should identify the issues in dispute and relevant evidence in support of their respective positions.
  • Final hearing takes place.

Conclusion

Legal and other costs for small property cases can be grossly disproportionate to the actual value of the asset pool. With cases taking up to two years to reach a final hearing, parties endure expenses in addition to legal and court costs such as maintaining and insuring assets pending their potential sale, storage fees and short-term accommodation costs. The parties must also contend with the emotional impact of court proceedings and the feeling of being ‘in limbo’ until a property division is finalised.

It is anticipated that PPP500 cases will proceed more expeditiously through to settlement, alleviating some of the emotional and financial stress to those with modest asset pools and freeing up the Court to deal with more complex family law matters.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Family Law and co-parenting in difficult times

The coronavirus (COVID-19) has brought additional stress and uncertainty to many families involved in co-parenting which, by its nature, can be stressful enough.

School closures, state and territory border closures, additional pressure on healthcare workers and providers of essential services, job loss and isolation all pose significant challenges to those families with shared parenting arrangements. This is a time to put conflict aside and take a practical and sensible approach to co-parenting.

If you or your children are in danger, please contact your local police immediately.

Parenting orders – managing in difficult circumstances

  • As always, the safety, welfare and best interests of the children should remain a priority. If court orders are in place, it is expected that they be complied with which includes facilitating time spent by the children with each parent pursuant to those orders.
  • Where strict compliance is not possible, or compliance puts the safety of the child at risk, the parties should wherever possible, communicate to identify practical and reasonable solutions.
  • Ideally, an agreement to vary the arrangements of existing orders should be in writing, whether by text message, email or other app.
  • Parents and caregivers can facilitate negotiations through their lawyers and applications to vary consent orders may be filed electronically with the Court.
  • Where an agreement cannot be reached, one party may seek leave of the court electronically to vary the orders.

 Co-parenting arrangements generally – practical tips and considerations

  • Be proactive – although agreed parenting arrangements may not have changed dramatically yet, anticipate that they may need to, and communicate now to put a plan in place. Obstacles to consider include school closures or extended school holidays, different changeover venues (with some venues now closed), potential lockdowns and additional demands on one or both parents such as health care workers and essential services employees.
  • Traditional work arrangements between parents may in fact reverse as full-time employees find themselves out of work and part-time and casual workers, for example nurses, become more in demand.
  • Compromise is key – accept that parenting arrangements will likely need to change during these circumstances, at least for the short or medium term. Having said that, parties should not manipulate the current crisis to leverage additional time spent with children when this is clearly not necessary.
  • With many travel plans cancelled, parents and caregivers may need to re-think planned activities with children. There are numerous resources online providing creative ways to keep little minds occupied during these times.
  • If one parent or caregiver is missing out on scheduled time with a child due to the current crisis, be generous in facilitating communication between that parent and the child – consider using apps such as FaceTime, Skype or Zoom, in addition to the usual phone contact.
  • Talk to your children about the current situation and try to remain calm and positive. How you explain what is happening to your children will depend on their age, level of maturity and the individual circumstances.
  • Be creative and resourceful but try to maintain, as far as practicable, regular routines such as personal hygiene, healthy meals and bedtimes.

Family Court arrangements

The Family and Federal Circuit Courts continue to operate but have made significant changes to their processes. How the Courts continue to function may no doubt change as the situation evolves.

Presently, only urgent matters will be conducted through face to face hearings for which strict in-court protocol to manage risk will be maintained.

Most other court hearings and events will be by telephone or video conferencing with some non-urgent matters to be postponed.

Documents will be filed electronically with registry services to be provided remotely by telephone or online.

We are here to help

The coronavirus pandemic is an evolving situation with a number of health and business orders issued at federal, state and territory levels. Government directions, advice and laws have, and will likely continue to change as new information and developments arise. It is important to stay informed of these updates through reliable sources.

Effective co-parenting means putting differences aside and working together to make decisions and care arrangements for children that are in their best interests.

We understand that this is a difficult and distressing time for many. Our firm infrastructure facilitates remote working conditions to serve our clients and assist them through these difficult circumstances. We will continue to provide advice and assistance through telephone and video conferencing across all areas of family law.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Where do the kids live after separating? The concept of shared parental responsibility

Many couples are able to agree on arrangements for the ongoing care of their children after they separate. These arrangements can be documented through parenting plans or formalised in consent orders without the need to attend Court.

Generally, parents are required to make reasonable attempts to resolve disputes about their children and, where agreement cannot be reached, must attend compulsory dispute resolution.

The Family Law Act 1975 (Cth) (the ‘Act’) provides a presumption of shared parental responsibility when considering the future arrangements for children. This concept however is sometimes misinterpreted as meaning that the children will spend the same amount of time with each parent.

This article provides an overview of how children’s matters are decided and explains the concept of shared parental responsibility.

How are children’s cases decided?

When negotiating children’s matters, the parties should take into consideration the way the Family Court would determine such matters should parenting issues not be resolved.

The overriding principles considered by the Court are that the best interests of the child are paramount. Essentially, this means that:

  • children should know and have the benefit of a meaningful relationship with both parents;
  • children should be protected from physical and psychological harm and harm resulting from them being subject to family violence;
  • children should receive parenting that allows them to reach their full potential;
  • parents should cooperate in determining what is best for the children;
  • unless a child is at risk, parental responsibility should be equally shared and children should have the right to spend time on a regular basis with both parents and other people significant in their lives.

What is shared parental responsibility?

The presumption of equal shared parental responsibility comes from ss 61DA and 65DAA of the Act. Section 61DA provides that ‘when making a parenting order in relation to a child, the court must apply a presumption that it is in the best interests of the child for the child’s parents to have equal shared parental responsibility for the child’. The presumption is subject to exceptions such as where there are issues of family violence or abuse.

Equal shared parental responsibility means that each parent should be jointly and equally responsible for significant long-term matters concerning their children such as making decisions about their health, welfare, religious and cultural upbringing and education.

The principle of shared parental responsibility has often been misconceived with separating couples believing that it is a ‘given’ that a child or children will spend equal time living with each parent after separation. This is not the case – living arrangements are decided with the main objective of the best interests for the child and a practical approach to what is realistic in light of the family dynamics, work commitments and other responsibilities.

Section 61DA specifically states that the presumption of shared parental responsibility ‘…relates solely to the allocation of parent responsibility [and not] the amount of time the child spends with each of the parents.’

How are living arrangements determined?

The amount of time a child spends with each parent will depend on a number of factors.

In considering whether a child should spend equal time with each parent, the Court must be satisfied that it is in the best interests of the child to do so and that such arrangements would be reasonably practical. If equal time living arrangements are not appropriate, then the Court will consider the child spending substantial and significant time with each parent.

In addition to the matters already outlined above, the following will be relevant in determining the best interests of the child:

  • any views expressed by the child;
  • the nature of the existing relations between the child and his or her parents as well as any other significant people such as grandparents and other relatives;
  • the extent to which each parent has already participated in the child’s life;
  • the likely effect on the child or any significant change in circumstances;
  • the age and maturity of the child;
  • any cultural matters that should be considered.

Factors taken into consideration regarding the practicalities of an equal time arrangement include:

  • how far apart the parents live;
  • the proximity of each residence to the child’s education centre or child care;
  • the parents’ capacity to implement equal time arrangements;
  • the parents’ willingness and ability to communicate, resolve conflict and deal with any issues that may arise;
  • the availability of the parents both physically and emotionally with consideration to work commitments, commitments to other family members and before and after school care options.

Conclusion

Shared parental responsibility means working with your ex-partner to make important decisions about your child’s life.

The Family Court has significant discretion and will take a comprehensive approach to determine what is in a child’s best interests when deciding living and other arrangements.

Court proceedings should be a last resort to determine children’s matters and separated couples should be cooperative and flexible to ensure that the children’s best interest are the paramount consideration.

By resolving disputes through mediation, separating couples can avoid the cost and anguish of attending Court in circumstances that are usually already fuelled with emotion.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Affordable break-ups – the sensible approach to dividing property

If you have recently separated, one of the concerns you will probably have is the size of your legal bill after your property matters are sorted.

Below are our top tips for keeping your family law property costs down without skimping on sound legal advice.

Tip 1 – do the groundwork yourself

A specific process is used when negotiating a property settlement. The first step is to identify the parties’ assets, liabilities and financial resources. This information is critical to determine the division of your property.

Compiling your financial information early in your matter and presenting it in an organised fashion has many benefits. It can be used at any stage – from negotiations, during dispute resolution and if necessary, for Court proceedings. As well as having a snapshot of your asset pool to assist in negotiations, you will likely save on costs associated with others having to arrange the information on your behalf.

When listing assets include their approximate value. Most local agents will provide a written market appraisal for real estate at no cost. For motor vehicles, you can visit www.redbook.com.au and obtain a printout of private sale figures for particular models.

Remember to include all assets – those that are jointly and individually held as well as those that are held with a third party. Assets comprise real estate, motor vehicles, furniture, art, antiques and collectables, shares, investments, superannuation, cash and business interests.

When listing liabilities include mortgages, loans, overdraft facilities and credit cards and for financial resources include wages, and income from other sources such as rental properties, dividends, business and company interests. Bank statements, share information and superannuation statements can easily be downloaded from the internet.

If relevant, financial returns for companies or partnerships should also be included and, if possible, the last three years’ tax returns for each party.

Tip 2 – Don’t avoid or put off getting legal advice

The sooner you know your rights the better. Many separating couples attempt to finalise their own property settlement or avoid settling their financial matters altogether. This is dangerous for several reasons. Failing to close joint accounts or to transfer assets is messy, leaves the parties vulnerable to future claims and makes it difficult for them to move on. It may also preclude them from getting credit with a subsequent partner and opens the potential for dispute.

Do It Yourself property agreements made in the absence of legal advice, often contain ambiguous provisions and are unenforceable. Without a complying Financial Agreement or Consent Orders (see below) parties are generally unable to access important stamp duty and tax concessions when it comes to transferring real estate from one to the other.

Family law is discretionary, and no two cases are the same. Investing in an initial interview with a family lawyer will provide guidance as to a likely settlement outcome and a basis from which to start negotiations.

Your lawyer will recommend any urgent measures you may need to take to protect property, advise you of your legal rights generally, and discuss the financial and other implications of a likely settlement. Your lawyer will explain the impact that your separation has on your Will and provide guidance on reviewing your estate plan.

Money spent early after separation on sound legal advice can return significant savings down the track.

Tip 3 – If possible, avoid going to Court

Generally, Court proceedings should be an option only when urgent orders are critical, the matter is highly complex, or when one or both parties are intractable, and a settlement is impossible.

Court proceedings exhaust time, money and emotions, and can usually be avoided. Most matters can be (and are) resolved and legally finalised by entering into a Financial Agreement or Consent Orders.

A Financial Agreement is a legal contract between the parties that sets out how their property matters will be resolved.

The agreement may provide for the closing of bank and loan accounts, the payment of money by one party to the other, the retention by one party of certain property such as a motor vehicle or furniture, transfer of the family home in exchange for a sum of money or the marketing and sale of real estate and distribution of the proceeds.

The parties are expected to cooperate in good faith and to uphold their obligations under the agreement and fulfil all requirements.

Financial Agreements are not approved or registered in Court – to be enforceable they must comply with the formalities prescribed by legislation. Each party will need to obtain independent legal advice before signing the agreement.

Consent Orders are considered more formal than Financial Agreements because they must be approved by a Registrar of the Court. An application for Consent Orders must include full financial disclosure by both parties and will be approved if the Court is satisfied that the orders are just and equitable.

Consent Orders will provide for the same types of matters as a Financial Agreement and can also include orders concerning any children of the relationship.

Tip 4 – Don’t stress the small stuff

You should never forfeit your legal rights however there are times when it is practical to agree to disagree, let things slide and move on. When emotions are involved it’s easy to get bogged down in minor issues that get in the way of a resolution and ultimately have little impact on the outcome.

For example, the difference argued in the value of a motor vehicle can soon be depleted by the costs of disagreeing, particularly if lawyers are instructed to get involved. Formal valuations cost money and are justified in many cases, however unless the motor vehicle is an irreplaceable classic, a middle-range figure obtained from Redbook should usually suffice.

Of course, there is little you can do if your ex-partner is antagonistic and fails to relent but maintaining composure should eventually prevail.

Conclusion

In between an informal or non-existent property settlement and a protracted battle where the parties refuse to budge, lies a fair and effective resolution that keeps legal fees in check.

These are just some of the ways you can use your time and resources wisely to help finalise your matter cost-effectively.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

We’re still friends, why do we need a ‘legal’ property settlement?

Many couples separate on good terms, which is great. The breakdown of a relationship can be difficult, however putting differences aside to move forward can be beneficial, particularly where children are concerned.

Ex-partners who remain on good terms may choose to make informal arrangements regarding the division of their property. However, the failure to legally document a property settlement can be unwise, particularly where the parties have acquired assets and / or liabilities, or where either have had their own assets prior to the relationship.

In most cases, even if you are a ‘happily separated couple’, there are many reasons to seek independent advice and have your financial affairs legally finalised. Following are some of these reasons.

Stamp duty concessions

The transfer of certain property, particularly real estate, is generally liable to stamp duty. However, certain exemptions from duty apply for transactions that are documented in a financial agreement or consent orders pursuant to the Family Law Act 1975 (Cth).

The exemptions are reflected in stamp duty legislation across different jurisdictions in Australia and can result in substantial savings. An informal agreement does not meet the prescribed requirements to obtain these concessions.

Taxation implications

Understanding the tax implications of a proposed property settlement and structuring the division of assets accordingly can have a significant impact on the net result for both parties.

Capital Gains Tax (CGT) is the financial gain made on the disposal of an asset. It is assessable income and must be included in a tax return.

Although the transfer of a matrimonial home between a separating couple does not generally attract CGT under the main residence exemption provisions, CGT liabilities may be triggered when transferring assets such as investment properties, collectables and certain other personal items. The Income Tax Assessment Act 1997 (Cth) however provides roll-over relief pursuant to a financial agreement or consent orders made under the Family Law Act. This means that any CGT liability is deferred until such time as the asset is later transferred by the party acquiring it, although the asset will remain subject to the same CGT conditions as it was before the transfer.

A potential future CGT liability is an important consideration when negotiating a property settlement. Care should also be taken when dealing with companies and trusts where various transactions could raise CGT issues.

Although family lawyers do not provide financial advice, they can flag potential tax issues and recommend working with an accountant to ensure a property settlement delivers the most viable results and avoids, wherever possible, unexpected tax liabilities.

Claims on post-separation assets

An informal property settlement is not legally recognised as bringing the couples’ financial affairs to finality, even if negotiations have been put in writing. Not only is an informal agreement insufficient to obtain relief from stamp duty or relevant tax exemptions, the parties are unprotected against a range of potential issues down the track. These include a subsequent claim by either party on post-separation assets, income and inheritances. The parties are also left vulnerable should one of them become bankrupt and the joint ownership of assets has not been severed.

The failure to formally discharge obligations under a joint loan or guarantor arrangements can also leave a party in a precarious financial state.

An informal settlement may not preclude one party, particularly if his or her financial circumstances change, from applying for a different division of property through the Court at a later time.

Finalising your property division

Once separated parties have agreed on the division of assets and liabilities, and obtained independent legal and / or financial advice, the negotiations can be made legally binding through a financial agreement or by consent orders.

A financial agreement is a contract between the parties – each have certain rights and responsibilities and must perform their obligations according to its terms. Financial agreements are not approved or registered in Court but, provided they are properly prepared, and each party obtains independent legal advice, they are generally enforceable by a Court.

Consent orders are similar to financial agreements however a Court must approve the proposed orders. The parties to consent orders do not need to attend Court for the orders to be finalised.

Financial agreements or consent orders may provide for a range of matters concerning the division of assets and liabilities, including:

  • the transfer of property from one party to the other;
  • the payment of funds in exchange for the transfer of property;
  • the sale of real estate or other property including terms regarding the appointment of an agent, method of valuation and distribution of surplus funds;
  • the splitting of superannuation;
  • requirements for paying out loans, credit cards and closing bank accounts;
  • financial support (maintenance) of one spouse by the other; and
  • any incidental issues.

Conclusion

Generally, family lawyers will support a reasonable agreement reached between a separating couple. In doing so however, they will ensure their clients are fully aware of the implications of a proposed property settlement, flag potential taxation issues and address future matters that may not have been contemplated between the parties. The negotiations can then be recorded in a legally binding agreement that meets the requirements for stamp duty concessions and, where relevant, tax relief.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Can I secretly record my spouse?

We’ve all had times when we can’t recall a conversation someone else swears we had. Often, one person in a relationship is more adamant about their memory than the other person. Usually, those mini-disputes are minor blips in an intact relationship. But what if it’s no longer an intact relationship? What if the “he said/ she said” dispute becomes part of family law proceedings?

One party might be tempted to secretly record their conversations with their ex-spouse or partner. But, is that lawful, and even if it is, is it a good idea?

Is it lawful to intercept a phone conversation?

The short answer is no. It is a federal offence to intercept (or tap) a phone conversation or other form of telecommunication. There are, of course, exceptions for ASIO, the police and similar organisations, but those exceptions wouldn’t apply in a family law situation.

Similarly, Australian law generally prohibits the recording of a private conversation between other people, to which the person doing the recording was not a party.

But what if you’re a party to the conversation?

Whether or not it’s lawful to secretly record a conversation (phone or otherwise) to which the person doing the recording is a party depends on the State or Territory in which the recording takes place. That is, such secret recording are permissible in Victoria, Queensland and the Northern Territory. However, it is prohibited in the other States and Territories – the ACT, New South Wales, Tasmania, South Australia and Western Australia.

The penalties for breaching the laws about intercepting or secretly recording a conversation vary, but can include paying damages to the other person and a term of imprisonment.

Can a secret recording be used as evidence in the Family Court?

Again, that will depend on where the recording took place and whether it was lawful in that State or Territory. In other words, if the secret recording took place in Victoria, Queensland or the NT and was, therefore, lawful, that recording could be used as evidence in family law proceedings.

However, if the recording was made in one of the States or Territories in which it is prohibited (ACT, NSW, Tasmania, SA and WA), the Court would have discretion whether or not to admit the recording into evidence. The Court would weigh up the benefit to the determination of the case in admitting the recording evidence, compared to the detriment to the parties and the justice of the case in allowing one of them to rely on illegally obtained evidence. Further, just because the illegal secret recording is admitted into evidence, the person who made the recording may still be liable to prosecution or damages for their offence.

Even if it’s lawful, should you do it?

The answer to this question will, of course, depend on the particular circumstances of the individual case. In a case where there are serious, regular disagreements about who said what and when, perhaps because drug or alcohol abuse or significant mental illness are involved, secretly recording conversations might be justified, in those jurisdictions where it is legal to do so.

However, even in cases where the secret recording of conversations might be tempting or may even seem warranted, before embarking on that course of action, the person wishing to do the recording should consider the future impact of considerable breakdown of trust in their relationship with the other person. It would be difficult, if not impossible, to continue to trust someone if you find out they have been recording their conversations with you without your knowledge. Ongoing trust between a separating couple is particularly important where children are involved and the couple need to share a parenting relationship into the future.

A middle ground option to secretly recording conversations with an ex-partner, regardless of whether or not it is lawful to do so in the particular jurisdiction, would be to make detailed notes of the conversations, as soon as possible after the conversations have ended. Such notes would be of significant benefit in preparing evidence for any family law proceedings, without jeopardising trust by secretly recording the conversations.

Conclusion

Whether or not it is lawful to secretly record a conversation, phone or otherwise, with an ex-partner depends on the State or Territory in which the recording is made. If the recording is unlawful, not only is there a risk that it will not be admitted into evidence in family law proceedings, the person making the recording could be liable to both civil damages and criminal prosecution. Even if it is lawful to secretly record a conversation with an ex, it isn’t necessarily a good idea to do so. A safer course of action might be to make notes of, rather than secretly record, the conversation.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.