Step 2: Contributions of each party
The contributions made by each party to a marriage fall into the following categories:
- financial contributions,
- non-financial contributions,
- contributions to the care and welfare of the family and
- contributions in the capacity of home-maker or parent.
In many cases, particularly where there has been a long relationship, the determination will be that the parties have contributed equally. The contribution of the parties may be viewed as something other than equal, where:-
- the relationship is short and there are no children, here the main concern will be about direct financial made by each of the parties;
- a partner has brought considerably more assets to the relationship than the other party;
- one of the parties contributed substantially via an inheritance, gift or personal injury settlement;
- a partner has special skills or has made outstanding efforts which have brought substantial wealth into the relationship; or
- a partner behaved in a deliberate or reckless manner resulting in a loss to the parties.
Assets are usually split half-half and then any necessary adjustments are made, taking into account all other factors including contributions.
If there has been violence in the relationship, this can affect the division of property. This is due to the possibility that the effects of violence may have limited the ability of a party to contribute.
Financial contributions are any monetary contributions made to the marriage either:
- before the marriage,
- during the marriage or
- after separation.
The financial contributions made by each party make up the asset pool.
Career assets are also financial contributions. They include contributions such as income, long-service leave and redundancy payment.
Notional assets are included as financial contributions. Notional property can be items such as legal costs and money spent individual pursuits such as gambling.
Financial contributions made before the marriage
Sometimes a party brings property to the marriage. Deciding how this property is shared depends on how the property is used and how the other spouse contributes to the property. The interest of the spouse bringing the property may be eroded by the passage of time and by the other party’s contribution to it and the asset will then be added to the asset pool.
Financial contributions made during the marriage
Financial contributions can be made towards purchasing, maintaining and improving property. They can be made either directly by a spouse or on behalf of the spouse.
A lottery win would be a financial contribution made during the marriage if the ticket is purchased during the marriage using joint funds. The winnings would be a ‘joint contribution’ and would be shared as such.
The beneficiary spouse of an inheritance may be allocated the assets of the estate, in circumstances where there is a substantial quantity of assets in the asset pool. Otherwise the inheritance is divided. The timing of the inheritance will be an important consideration.
A compensation payout is usually seen to have had both spouses contributing. The entitlement of the injured spouse is based on suffering and the entitlement of the other spouse is based on the contribution of caring for the injured spouse.
Financial contributions after separation
There are two methods of considering entitlements to property acquired after separation.
The first method considers how the property is used and how the other spouse contributes to the property. The interest of the spouse owning the property may be balanced by the other party’s contribution to it and the asset will then be added to the asset pool.
The second method looks at contributions after separation made by the non-owner spouse towards all matters concerning both parties.
Case: Husband wins $5M in lottery after separation
In Farmer and Bramley, the husband acquired a winning lottery ticket 20 months after separation. The prize money was $5,000,000. Until the win, the parties had no property after a relationship of 12 years. There was one child of the marriage who lived with the mother. The wife was entitled to $750,000 as she cared for the child after the separation and also cared for the husband during the marriage, nursing him through a heroin addiction.
Career assets in a family law property settlement
Sometimes one spouse obtains a valuable qualification whilst accumulating minimal property, meanwhile the other spouse takes additional responsibility for financial and family support. In these circumstances, the career assets of the qualification earning spouse are brought into the asset pool as a financial resource. The spouse without the qualification can be awarded payments for the extra responsibilities accepted and carried out.
Career assets can be difficult to value, as different qualifications take different amounts of time and effort to complete and may or may not lead to employment.
A partnership interest in a business is property, however such interests are often considered to be personal and not transferable to a third party such as a spouse.
Prospective long service leave and redundancy payment entitlements will only be regarded as property if payments have been received.
If a spouse is a company director, shares owned by the director in this company will form part of the asset pool, however assets owned by the company will not. Any shares held in public or private companies can be included as property in the asset pool.
Notional assets in a family law property settlement
Financial resources may include legal costs paid, property disposed of for the benefit of only one of the parties, expected inheritances and gifts from parents. These financial resources are calculated and allocated by the court or according to agreement between the parties.
Income is usually not included as a financial asset and is not considered property for the purposes of a property settlement. However, it can be taken into account as an additional factor. A party with little in terms of financial assets may be awarded more property assets to compensate, this is in the interests of ensuring a just and equitable result.
Money earned after separation is usually not ‘added back’ into the asset pool. However there are some exceptions, for instance if the funds arise from selling a business asset after separation where the business operated during the course of the marriage, then the funds may be included in the asset pool.
Case: Taxi license sold after separation
Usually funds accumulated post-separation are not added back into the asset pool, however, in some cases they can be. In the case of Townsend and Townsend, the money earned from a selling a taxi licence was included in the asset pool. The reason for including the money was that the licence had value during the marriage and therefore the other party was entitled to a proportion of the proceeds from the sale.
Legal costs are usually considered notional property and are included in the asset pool. It is necessary though for these funds to have been earned prior to separation.
Certain types of expenditure are considered to be notional property and will be ‘added back’ into the asset pool. These types of expenditure include gambling, behaviour contributing to addictions and extravagant gifts. If add back occurs then the reasonableness of the expenditure is taken into account and the assets added to the asset pool must be of a reasonable amount.
Non-financial contributions to life as a couple are an important and significant consideration for a property settlement.
Non-financial contributions made to the marriage are contributions involving services where a professional or tradesman might have been employed had the party not performed the work.
Examples include maintenance and renovations of the family home, cars or any other asset owned by the couple.
Maintenance and renovations
Non-financial contributions may increase the value of property or save on maintenance costs. They are included as they effectively increase the value of the property or funds available. Factors considered are the quantity of work undertaken, the worth of the work and the party completing the work.
Contribution to the care and welfare of the family
Domestic and family welfare contributions have received increasing recognition and importance. Since 1983, these contributions have gained the status of a separately considered contribution.
Where one party works outside the home to support the family and the other takes care of the family contributions to the care and welfare of the family are an important consideration.
Examples of contributions to the care and welfare of the family are:
- caring for children,
- school drop-off and pick up,
- taking children to sport and other activities and
- responsibilities as a home-maker.
Case: Wife placed in domestic servitude granted 75% of assets
A man who married his sixth wife lost 75% of his assets, including his house and his business .. [read more].