If you have separated from your spouse or de facto, you will need to divide up the asset pool of the relationship. Before you can settle, you need to do your homework. This article will take you through the necessary work to be done prior to mediation, so that you have the best chance of resolving your financial dispute before you end up in Court.
Do not procrastinate if you can help it. If there is a lot of time between separation and when you start negotiating, the matter becomes more complicated. You then need to factor in post-separation contributions, expenses, purchases, value increases and so on.
This article is not legal advice to be relied upon. It provides a basic guide to the process of resolving a family law financial dispute. If you are unsure about anything described below, a lawyer who specializes in family law will have the answers to your questions.
Step 1 - Correspondence
Trading Disclosure
The most important first step is to become satisfied that you know about everything relevant to your dispute. That includes knowing the full extent of the asset pool, and other important issues such as whether money has been wasted, hidden or given away. The asset pool is made of assets, debts, financial resources and superannuation.
If you are de facto or married, you have a legal right to all of the financial paperwork. You have a right to know the full extent of the asset pool. You have a right to ask for copies of relevant documents. This can include bank statements, tax returns, business reports, inheritances, payouts, superannuation balances, and various other documents. You must also provide documents that you have in your control, or have access to, about the asset pool if they are requested. This is called the “Duty of Disclosure”.
Exchanging disclosure quickly and efficiently is very important to a speedy resolution. You don’t have to ask for disclosure if you are already satisfied that you know the full picture. It is ultimately your decision how much information you need.
Valuing the Asset Pool
While you are trading disclosure, you also need to be discussing the items in the asset pool. Make a list of all the things that you own between you like houses, cars, caravans, household items, tools, etc. Also include all the debts including mortgages, credit cards, and money owed to family. Then also add the superannuation of both parties. This includes anything owned before you started living together, or acquired after separation.
You then need to propose a value for each item. When you correspond with your ex, you will find out which items are agreed in value and which need to be valued. Houses can be valued by appraisals or officials valuations, and cars with a Redbook estimate. Also note that it is the resale value and not the replacement value. Most small household items are agreed by rough estimation and discussion with the other party.
Valuing businesses can be very tricky and it is always a good idea to obtain disclosure about the business and talk to a good accountant who can give you a rough idea of the business’s value. You may then need a formal valuation from an agreed expert.
It is important to keep discussing the values of the items until you have agreement. If you cannot agree on the value of a major item, you should consider engaging an agreed valuation expert prior to attempting mediation.
Proposing who takes what
With your list of the items in the asset pool, you should also propose what you would like to keep. For example, if you want to “buy out” the other party from the family home, let them know.
This is often quite easy as each party will keep their own car, personal items etc. However, if both parties want to keep the family home, you may need to agree to sell it and thereafter deal with the proceeds.
Factors Relevant to Dividing the Pool
In your correspondence, you also need to talk about the factors that will influence the overall percentage split of the asset pool. This is the most difficult part to do without the help of a lawyer.
Basically speaking, to figure out what the percentage split should be, you need to look at the past and the future. When looking at the past, you need to take into account how you achieved your wealth. This includes looking at financial, and homemaker contributions. You also need to consider the length of the relationship, windfalls, inheritances, renovations, what you each had at the beginning, and various other factors such as wastefulness like gambling.
When looking to the future, you need to consider earning capacity, future needs, care of children, health, age, disability and everything else relevant to the financial needs of the parties.
Even if you are not ready to propose a settlement, it is a good idea to discuss what factors relating to the past and future you consider relevant and why. It will make negotiating easier and less stressful later.
Making a Offer to Settle
If you are satisfied with disclosure, the list of the asset pool, the agreed values, and a rough idea on preferences with retaining assets, you may feel ready to propose an offer to settle. However, prior to making an offer to settle, or attending mediation, I would recommend obtaining legal advice. You don’t want to go negotiate with unrealistic expectations, or to have missed something majorly important. A single meeting can be very valuable.
That being said, you have every right to self-represent, and there is no legal requirement that you engage a lawyer.
You should prepare a schedule that clearly shows all of the items, their values, who retains what including cash and super, and the overall percentage split.
If they do not agree and respond with a percentage split that you consider to be unfair, then you should consider attempting mediation.
Step 2 - Mediation
If you are satisfied with disclosure, and agree on the value of each item in the asset pool, you may be ready to attend mediation.
Firstly, if your ex has a lawyer for mediation, it is strongly recommended that you also obtain the services of a lawyer for the mediation. With only one party represented it can be very difficult to settle for many reasons. However, if neither party is represented, you can rely on the expertise of the mediator to guide you along.
Before you attend mediation, you should prepare a summary of your position to provide to the mediator and your ex. This allows the mediator to know your position and reasoning in advance so they have time to consider your proposition. Secondly, it gives your ex time to consider your position so on the day of mediation they are not shocked and angered by what you are proposing. They have had time to calm down.
This includes a schedule of the current ownership of the asset pool and the agreed values. It also includes an additional schedule outlining what you propose to be the settlement including the percentage split overall. You also need to explain, by reference to the past and future, why you say the percentage split you are proposing is fair. You need to set out your arguments clearly.
On the day of mediation, do your best to not get angry. Trying to negotiate with hurt feelings and disappointment often turns people spiteful and irrational. Before you go into mediation, consciously try to make yourself as calm as possible. An effective way to stay calm in meditation is to take long pauses before you speak. Slowing down the pace can keep things on track.
Also, expect to compromise. A famous quote among Family Court Judges is: “You know the outcome is correct when both parties walk away disappointed.” This illustrates the fact that you are both going to be poorer after you divide up the assets. It is a fact that must be accepted. You are not going to get to keep a satisfying portion of the asset pool.
Mediation should not be about discussing whether assets are hidden, or undervalued. It should not be about matters that should have been resolved during the correspondence phase. To succeed at mediation, you should not be ambushing the other party with surprise legal arguments or facts. You should be there to discuss the one major outstanding issue: what the percentage split should be.
If you can reach an agreement, it is always best to talk to a lawyer about the best way to secure that agreement in a legally binding and final form. Good luck.