tenants in common Archives

Consideration of Inheritance in Property Settlements: Who’s Entitled to What?

September 11, 2020 by Carter Dickens Lawyers

How Does Financial Separation Work?

There are four ways financial separation can occur:

By Orders of the Family Court of Western Australia;
By Consent Orders;
By Binding Financial Agreement; or
By Informal Agreement.

You should seek legal advice from a lawyer experienced in Family Law property matters to determine the best form of financial separation for you.

When finalising your orders formally, there is an expectation that Orders or an Agreement should completely sever the financial ties between the parties, known as the clean break principle, and then ‘vest’ any property a party is entitled to in the name of that party. In doing that, it means that except in very limited circumstances, your ex should not be able to come back and try and seek further funds from you.

What Happens if I receive an Inheritance Payment Prior to Financial Separation?

It’s not always simple to come to an agreement on financial separation, and there is always a risk if you only come to an informal agreement, that your ex can try and come back later and seek more funds from you. This may occur where one party receives an inheritance after the death of a parent.

There is a common misunderstanding that inheritance received after separation, or towards the end of the relationship will not be included in the asset pool. This is not always correct. Assets obtained post-separation or to benefit only one party are still considered a part of the asset pool. The Courts starting position is that all assets obtained, during the relationship and even post-separation is to be considered during a property split. This is often referred as the “global approach” and whilst it is common, there are exceptions to the rule. If a party wishes to “quarantine” inheritance then they must be able to show there are sufficient funds in the asset pool to ensure a just and equitable division and that the other party can still receive a fair portion of the asset pool without having to take from the inheritance.

When it comes to inheritance, relevant considerations include, when the inheritance was received and the nature of the relationship between the deceased and the other party.

Timing

If the inheritance was received early in the relationship or even before the relationship commenced, it is usually treated as an initial contribution of that party and is a relevant factor in the division of assets.

If the inheritance was received during the relationship it can be considered to be used for the “betterment of the family or the couple” and is likely to be considered a contribution to the relationship and not to the benefit of either party. The exception to this however is if the deceased makes it very clear that the inheritance is only to benefit the inheriting party. In which case, the funds would likely be considered as a financial contribution by the inheriting party and there would be some recognition in the division of the asset pool of the money provided.

If the inheritance is received post-separation, there are two ways it could be treated, and, depending on your individual separation will depend how it is treated. It will be treated as either:

Part of the global assets; or
A quarantined asset

Relationship Between the Deceased and the Other Party

When deciding if an inheritance should be shared between the spouses in a financial separation, the court considers the intention of the deceased. If the deceased appears to have left the inheritance for the betterment of the entire family, a court is likely to include it in the asset pool despite the receipt of the inheritance being after separation. On the other hand, if it appears to have been left only to the named beneficiary, it is likely to be kept apart from the divisible assets. Similarly, the court will look at the relationship of both spouses with the deceased to discern what the intentions would have been.

Essentially, if the inheritance is received before finalising Consent Orders for the property settlement, it is possible that it may be included in the asset pool. It is best to seek legal advice on the possibility of including or protecting an inheritance from being included.

For advice on financial separation, especially if you are aware you or the other party will be, or have, received inheritance or the likelihood of inclusion of an inheritance after separation, contact us on (08) 9408 5212 or info@cdlawyers.com.au to book a meeting.

Please note that the above is general information and should not be relied upon as legal advice. All situations are different and legal advice must always be tailored to the specific situation.

Will my illness or disability lead to an adjustment in Financial Orders?

July 1, 2020 by Carter Dickens Lawyers

Often during the course of property settlements, it is asserted by one of the parties that they ‘deserve’ a larger portion of the asset pool due to reliance on certain factors. The factors relied upon are found in the Family Law Act 1975 (Cth), in particular Section 75(2) for married couples, and Section 90SF(3) for de-facto couples. Application of these provisions is seen as the third step (out of four) that Australian Courts typically undertake in making Financial Orders.

The four steps undertaken by Courts are generally set out as follows:

Identify and value the assets, liabilities and resources of the parties;
Consider the contributions of the parties made throughout the relationship;
Consider the future needs of each party; and
Determine whether the proposed settlement is just and equitable.

Essentially, at the third step the Court evaluates the future needs of the parties taking into account their individual circumstances. The aforementioned provisions set out 19 factors that may be taken into account by the Court in evaluating the extent of each parties’ future needs. The relevant subsections relating to adjustments for disability and illness are the following:

The age and state of health of each of the parties (s 75(2)(a)); and
The income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment (s75(2)(b)).

Unfortunately, many Australians face challenges in their everyday lives associated with ongoing disabilities or illnesses. At Carter Dickens Lawyers we seek to assist those who may be vulnerable in financial settlements, and ensure they are aware of their rights and the impact their disability may have upon the expected distribution percentage they would receive from a Court ordered financial settlement.

Am I likely to receive an adjustment in my favour due to my disability?

The assessment of ‘future needs’ remains a discretionary activity undertaken by the Court. Therefore, it is difficult to say with confidence that an ongoing disability or illness will guarantee a percentage adjustment in your favour by the Courts.

However, there are precedent cases which appear to suggest a 5-15% adjustment may be made where one party suffers from disabilities and this impacts their ability to achieve gainful employment in the future. In particular, the case of Dritsas v Wilson [2008] FMCAfam 44 saw a section 75(2) adjustment in the wife’s favour of 10 per cent where the potential of future employment was essentially non-existent due to the extent of the wife’s disabilities and her age.

Although there appears to be precedent for making these adjustments, and the legislation specifically makes reference to age, health and the ability to gain meaningful work – each case is determined on an individual basis. We therefore recommend you seek legal advice on this matter if you are either going through a financial separation or are planning on seeking financial orders.

What if both myself and my ex suffer from disabilities/illnesses?

Unlike the circumstances aforementioned, in some cases both of the parties to a financial separation suffer from illnesses or disabilities respectively. This situation creates greater difficulties for Courts in evaluating the ‘future needs’ of the parties as both may have their own valid claims.

Again, this situation would see the courts exercise their discretion, and all factors would be evaluated prior to any Order is made. However, Nathan & Nathan [2007] FamCA 589 was an example where the Family Court of Australia deemed it equitable to make no adjustment. In this case, Justice Kay at [23] stated no adjustment would be made out for the following reasons:

“A global view of this case shows two people with very limited earning capacity, two people with significant medical disabilities. They are both aged 46. Neither of them has a very secure economic future to look forward to. The husband appears able to live on his wits. The wife has secure employment at least with some modest superannuation available to her. It does not seem to me to be a case in which any s 75(2) adjustment is appropriate.”

Essentially, where in the Courts discretion the parties equally suffer from limited earning capacities and significant medical disabilities/illnesses, it may be just and equitable to make no adjustment for future needs, instead opting for an equal split of the asset pool.

From the situations discussed, it is clear that the Court is empathetic to the plight faced by those with illnesses and disabilities; however, the extent to which this will impact Financial Orders depends on scope of the facts at hand. If you believe that the section 75(2) factors discussed in this article may apply to your circumstances, please contact Carter Dickens Lawyers on (08) 9408 5212 for a free 15-minute consultation with one of our lawyers.

Carter Dickens Lawyers specialise in Family Law and Financial Disputes. We pride ourselves on our ability to provide legal assistance and advice, including on niche areas of law, such as the impact of disabilities on expected percentage distributions from Financial Orders. We will ensure that you are fully informed of any rights and risks associated with your divorce or financial matter.

Please note that the above is general information and should not be relied upon as legal advice. All situations are different and legal advice must always be tailored to the specific situation.

Joint Tenancy After Separation: Will a Financial Settlement Require Us to Sever?

January 16, 2020 by Carter Dickens Lawyers

When determining a financial settlement, the Family Law Act 1975 (Cth) is clear that there must be finality. That is, there must be a ‘clean break’ between the parties with no ongoing financial connection so as to avoid future proceedings between them. But what happens if you want to remain co-owners?

What is joint tenancy?

Most couples hold property as ‘joint tenants’ – that is, they equally share ownership. If one joint tenant passes away, their interest in the asset automatically passes to the other owner(s). This is known as the right of survivorship.

‘Tenants in common’, on the other hand, hold a defined share of the property which is separate from the other owner. This interest forms part of the estate of each owner and, on their passing, is distributed according to their will.

What happens if we want to remain as joint tenants?

Of course, the most logical step to take when seeking a financial settlement is to sever your joint tenancy so as to eliminate the right of survivorship and ensure your interest forms part of your estate. The parties will then become tenants in common, and their interest becomes separate and distinct.

However, sometimes this option does not suit everyone. For example, what if the asset in question is a successful business and, while the parties want to end their personal relationship once and for all, they want to remain business partners?

In Vancovich v Dunfield [2016] FamCA 393 a husband and wife lodged consent orders with the Family Court seeking to remain as joint owners of a business, but the Registrar refused to make the orders on the basis of the ‘clean break’ principle. On review, the Court of Appeal accepted that, given the parties had obtained independent legal and financial advice, the proposed orders were ‘just and equitable’. This was decided on the condition that any further proceedings in relation to the co-ownership are to be brought under the Corporations Act 2001 (Cth) and not in the Family Court.

As such while the Court is willing to make exceptions, its reluctance in doing so clear; you must demonstrate some exceptional circumstance which explains why severing the joint tenancy would be unjust and unequitable.

So what can I do?

At Carter Dickens Lawyers we specialise in drafting consent orders which cater to your specific needs. While remaining as joint tenants for the indefinite future may be off the table in non-commercial settings, we endeavour to meet the requirement of finality whilst allowing you to remain as joint tenants as long as necessary to serve the purpose of your special circumstance.

Please note that the above is general information and should not be relied upon as legal advice. All situations are different and legal advice must always be tailored to the specific situation.

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