Financial settlement after separation: 3 of the most important legal matters
While going through a separation, it’s common — and normal — to be concerned about your financial situation going forward.
For example, you may have thoughts regarding:
- What if you were completely reliant financially on your ex-partner?
- How are you going to afford to raise your children?
- What if you can’t work?
Most people are uncertain as to what their legal entitlements and obligations are in terms of dividing assets, and financially maintaining their ex-partner or children. A family lawyer can provide clear advice as to how your assets and liabilities should be divided in accordance with the Family Law Act 1975 (Cth), and whether you should seek Orders for spousal or de facto maintenance.
There are three main categories of financial considerations after separation:
In this article, we’ll explore each of the three types of financial settlements after separation and some legal considerations for them.
Property settlement after separation
This is the overall division of existing assets and liabilities solely or jointly owned by each party. There are several factors that must be taken into account when ascertaining what an equitable division of the asset pool would look like, including:
- The length of the relationship;
- Any assets or debt either party brought into the relationship;
- Each party’s financial contributions during the relationship and post-separation;
- Each party’s non-financial contributions, such as by way of homemaker and child care duties during the relationship and post-separation;
- Any financial resources available for each party;
- The earning capacity of each party; and
- The future needs of each party, including whether either party is responsible for the care of children under 18, or whether either party suffers from any significant illness which may impact that party’s capacity for full-time work.
Maintenance payments after separation
Spousal or de facto maintenance is financial support provided by one party to help the other party meet their ongoing living expenses. This may be paid on a periodic basis (for example, weekly), or it may be paid as one or more lump sums.
A party to a separation is not automatically entitled to maintenance, with the Family Law Act stipulating that maintenance may be payable in the following circumstances:
- Having the care of a child of the relationship who is under the age of 18;
- Being unable to work due to physical or mental incapacity; or
- Any other adequate reason; for example, having the care of an adult child with a disability.
Evidently, the legislation allows for a broad range of circumstances to cause a person to be eligible to receive maintenance. However, that person seeking to receive maintenance must be able to show that they cannot adequately support themselves, and the person who would be paying maintenance must have the capacity to pay.
It is important to note that any maintenance payments after separation are separate from any property settlement and don’t form part of the asset pool. However, maintenance can be taken into account when considering the future needs of a party for the purpose of dividing the asset pool. It is sensible to address maintenance at the same time as property settlement negotiations, so that all your financial matters may be resolved at once.
If you receive maintenance from your ex-partner, it is important to remember that your payments may end if your financial situation improves, if you remarry or enter into a new de facto relationship, if your earning capacity improves, or if you no longer have children under 18 in your care.
To end or change periodic maintenance payments which have been ordered by the Court, you or your ex-partner must apply to the Court to have the maintenance Orders changed.
Child support payments
Child support is money paid from one parent to the other for the support of a child of the relationship. It’s an important mechanism to ensure that children in Australia are adequately supported through life; however, quite often it is also a very contentious issue between separated parents.
At any time after separation, either parent may apply to the Department of Human Services (DHS) for a child support assessment. The DHS will then determine how much child support should be paid using an 8-step formula. The factors which are taken into account include but are not limited to:
- The number of children;
- The children’s ages;
- Both parents’ incomes; and
- The percentage of time each parent has the children in their care.
If either parent’s circumstances change, or if care arrangements for the child change, a new assessment may be done, and the child support payment amount may be adjusted accordingly. It is important to remember to be honest in an application to the DHS, as it is an offence to provide false or misleading information, and penalties for this offence may include a significant fine or imprisonment.
When a child reaches 18 years of age, child support payments usually end.
However, if a child turns 18 while still in high school, a parent may apply to the DHS to extend the payments until the end of the school year. Child support payments cannot be further extended; however, in very limited circumstances, a parent or adult child may be eligible to apply for adult child maintenance.
The DHS can also collect child support payments on behalf of a payee parent, which may assist in circumstances where the liable parent fails to make the required payments.
It is possible to reach an agreement on how much child support will be paid, without involving the DHS. This agreement may be formalised by way of a Child Support Agreement, and it can include period payments (such as a certain sum paid weekly) and/or non-periodic payments (such as payment of school fees).
If you have any questions about financial settlement after separation including property settlement, spousal or de facto maintenance, or child support, we can help ease your mind.
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