Negotiating Terms of a Divorce
Written by: Adam Wightman | Legal Team
There are often a variety of issues that need to be negotiated and resolved after a couple separates.
These issues usually concern the finalisation of the parties’ financial relationship through the division of their assets and liabilities, the ongoing care arrangements for children, and the completion of the divorce itself (where the couple are married).
Whilst many people colloquially refer to the separation and the finalisation of a financial settlement and parenting arrangements as a ‘divorce’, they are actually a separate (albeit related) process.
The formal divorce itself is a largely ceremonial process by which couples no longer become legally married as husband and wife in the eyes of the law. Parties are required to be separated for a period of at least 12 months before they are able to apply for a divorce. The formal divorce itself does not directly affect the parties’ finances or parenting arrangements.
In contrast, a legally binding financial settlement can be finalised between parties at any time after they have separated (there is no need to wait until 12 months have passed since separation). The same is true for the formal finalisation of parenting arrangements for children.
Whilst there is generally no need to negotiate the terms of the formal divorce itself (one spouse can simply apply for and be granted a divorce without the consent of the other spouse), there is usually much more negotiation required to finalise a financial settlement and/or the care arrangements for children.
Separation isn’t exclusively complicated in the situation of Divorces, De Facto partners can find that there are still things to work out legally. Read all about it in our previous article! What’s My De Facto Partner Entitled To?
Understanding Property Settlements After Separation
Family law property settlements are generally legally finalised by way of the parties obtaining a Court Order that outlines which assets and liabilities they will both retain.
This legally binding Court Order ends the parties’ financial relationship and ensures that neither party can come back against the other for anything further in the future (save for some exceptional issues such as child support).
Family Law Property Settlement Court Orders can be obtained either the easy (or at least easier) way or the hard way.
The ‘easier’ way of obtaining a Family Law Property Settlement Court Order occurs when the separated couple negotiate the terms of the settlement (either directly between themselves or with the assistance of family lawyers) and they come to an agreement. The terms of the agreement are then drafted into a formal agreement by one or both of the parties’ family lawyers, together with a supporting document called an ‘Application for Consent Orders’ which sets out the facts and figures. These two documents are signed by the parties and filed with the Court. If the agreement is within the general range of what a Court deems appropriate, then it is stamped and approved as a legally binding Court Order. This type of Court Order is often referred to as ‘Consent Orders’.
Where the agreement falls outside the range of outcomes that a Court would consider to be ‘just and equitable’, then the parties can still legally formalise such an agreement by way of an out-of-court agreement (known as a Binding Financial Agreement). However, this process requires both parties to have independent legal representation.
The ‘hard’ way to get a Family Law Property Settlement Court Order occurs where the parties are unable to agree on the terms of a settlement (either by way of direct negotiation or with the assistance of family lawyers) and one of the parties is required to make an application to the Family Court to resolve the matter.
At numerous points along the lengthy (and expensive) Court process the parties will be given the opportunity to resolve the matter by way of negotiation/agreement and end the litigation there, however if they are still unable to agree they will get to the final hearing and the Judge will make a decision about how the assets and liabilities are to be divided. Whilst it is relatively common for parties to issue Family Court litigation proceedings, most matters will resolve by negotiation/agreement along the way and avoid the need for a final hearing.
Therefore, the purpose of negotiations in family law matters is to ensure that the parties can resolve their outstanding issues as amicably, promptly and cost-effectively as possible, so as to avoid the need to issue proceedings in the Family Court and particularly to avoid progressing to a Final Hearing.
Complex Asset Divisions During Divorce Negotiations
Different types of assets held by parties can affect the length and complexity of negotiations, and the number and type of other professionals that may need to be involved in the process.
For example, many separating couples will have an asset pool primarily comprising of a family home subject to a mortgage, a couple of cars, some modest bank accounts and their respective superannuation entitlements. In these circumstances, the values to be attributed to the assets are usually quite straightforward and non-contentious.
The value of the family home can be established through the parties obtaining free market appraisals from real estate agents (or through the use of a paid independent sworn valuer if necessary), the value of the motor vehicles can be established through Redbook valuations, and the values of the bank accounts and superannuation can usually be established from the statements. The parties then need to determine an appropriate percentage division of the net asset pool (often with the assistance of advice from family lawyers) and they can then determine how the assets will be divided (which usually centres on the issue of whether the house will be sold or whether one of the parties wishes to retain the home and ‘buy out’ the other).
However, there are some separating couples who own multiple properties or businesses and other corporate entities and investments.
In these circumstances, the negotiations can become much more complex, and it is advised that the parties seek the assistance of family lawyers. Furthermore, the family lawyers may require the assistance of third-party professionals such as accountants, business valuers and independent sworn property valuers to determine the value of the asset pool. Further consideration may also need to be given as to which party will retain business and how business and other investments and corporate entities will continue to operate now and into the future.
Managing Parenting Arrangements + Financial Settlements
If the separating couple have children, they will need to determine appropriate care arrangements for the children.
Again, this can occur by way of direct negotiation or negotiation with one or both parties having the assistance of lawyers or an independent mediator. If agreement cannot be reached, then the Family Court can determine this issue.
However, parenting issues can also have an effect on property settlement/financial negotiations.
For example, a party will usually receive a greater percentage of the net matrimonial asset pool (than they would otherwise receive) by virtue of having the primary care of a child/children of the relationship. The younger the chid/children and the more children there are will usually result in a greater percentage adjustment in favour of the primary carer.
Depending on the parenting arrangements, one parent may also have an obligation to pay child support to the other parent as assessed by the Child Support Agency (now referred to as Services Australia). Where this exists, the parties may be able to combine this issue in the negotiations for the financial/property settlement. In this regard, family lawyers can draft agreements known as Binding Child Support Agreements that override any assessment by the Child Support Agency and provide for the payment of periodic child support (regular weekly/fortnightly/monthly payments) and/or non-periodic child support (i.e. the payment of private school fees, school books, uniforms, private health insurance, dental, extra-curricular activities etc). The inclusion of these issues can greatly alter the dynamics of negotiating a family law financial/property settlement.
The Importance of Full Disclosure
Both members of a separated couple are legally obligated to provide full and thorough disclosure to one another of all assets and liabilities that they hold, and all income earned by them.
This obligation exits even before one of the parties issues litigation proceedings in the Family Court.
Both parties are required to provide each other with copies of all documents that they may hold in their possession verifying the ownership and value of all assets and liabilities that they hold, and all income received by them. Things such as taxation returns, payslips, bank statements and superannuation statements need to be exchanged between the parties (either directly or via their lawyers) if requested by the other side.
Parties are also required to attempt an alternate dispute resolution process such as mediation to resolve their financial/property settlement prior to issuing litigation proceedings in the Family Court. However, if parties agree on a settlement without issuing litigation proceedings in the Family Court, then this agreement can be ratified by the Court by way of ‘Consent Orders’ without the need to engage in mediation.
Prenuptial agreements can help married couples, in the event of divorce, cleanly separate assets and relieve stress in the event of separation. If you’re thinking of having a Prenuptial Agreement, read our previous article to find out what to think about including! What To Include In Your Prenuptial Agreement
Canny Legal + Navigating Your Divorce Negotiations
An appropriate outcome in a family law settlement usually has both parties feeling slightly underwhelmed with the result, but feeling content enough to move forward with their lives.
However, if you are entirely unhappy with the progress of family law financial/property settlement negotiations with your spouse, or you would just like to know where you stand, get in touch with our team to have a chat and to get the ball rolling with our team of expert family lawyers.
