Property of the Marriage: What Assets are Available

Date: Nov 15, 2009
Document Type: Article

Upon the breakdown of a marriage one of the issues that needs to be addressed is a financial settlement. This involves dividing the assets, liabilities and superannuation of the parties whereby each party is allocated their share of the net assets, with the end result that none of the assets and liabilities are held in joint names.

The first step in the process of a financial settlement is determining the balance sheet. Before any settlement options can be looked at, the parties need to have a clear idea of what assets are available for division. In the process of determining this, each party is required to make full and frank disclosure of their financial circumstances. Commonly a starting point for this process is to have each party complete a financial statement, which is a prescribed form used in Family Court proceedings. It sets out a neat snapshot of each party’s sources of income, their average weekly expenses, their assets, liabilities, financial resources and superannuation.

Any asset of either of the parties, whether real or personal property, is available for division. It does not matter whether a party to a marriage holds an asset solely in their name, or jointly with a third party. The interest that they hold after being identified will need to be valued, and it is then included in the balance sheet when assessing the total net asset pool.

In some cases families may have an interest in companies or trusts. How are they treated? If a party effectively has control over a company, being the sole share holder, then any of the assets held by the company will be treated as an asset of that party, and will be available for division. Similarly if a party effectively controls a family trust, then that entity will be treated as an alter ego of that party and any assets held by the trust will be included in the balance sheet for division.

Where a party has shares in a company along with other persons who are not parties to a marriage, then the party to the marriage with shares in the company will not have effective control over the company. Therefore all of the assets of the company are not made available for division. However the asset that will be made available for division will be the shareholding in the company, and its value will be influence by the assets backing the company.

Where a party to a marriage is a beneficiary to a trust and does not have control over the trust, then any of the assets held by the trust will not be treated as assets for division. Rather the benefit that the party receives from the trust, such as dividends, will be treated as a financial resource of the party. This will influence what entitlements each of the parties will have to the remain assets.

Previously superannuation was treated as a financial resource, being something that each party will have the benefit of at some point in the future. This still remains the case, however the Courts now treat superannuation as property of the parties. Superannuation funds can now be valued, and the methodology applied to value each fund will depend on the type of the fund that exists. Once a superannuation fund has been valued, then the options for dealing with the superannuation will include leaving the entire benefit in each fund standing to sole name of each respective party, or alternatively splitting a superannuation fund whereby a dollar amount is set aside from one party’s fund and then rolled over into a fund of the other party’s choosing.

Once the interests of each party has been disclosed and verified the parties are then in a position to look at formulating settlement options, and the reasoning behind it.

Craddock Murray Neumann has a specialised family law section with two Accredited Specialists in Family Law, one a former Registrar of the Family Court of Australia.   For assistance telephone Dominic Wilson on (02) 8268 4000.  
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