What happens to property owned before marriage?
A common question we get regarding property division is ‘if I had it to start with, can’t I just keep it?’ Whether you have a lot or a little, the short answer is that those ‘initial contributions’ are rarely excluded from the property pool. Let’s explain…
What is property?
The definition of ‘property’ in the Family Law Act is very board, essentially involves everything the parties have, regardless of the name the asset is registered in.
The property division process:
The property division process under the Family Law Act involves a four-step process. Those steps are broadly outlined as;
- Identify and value the assets, liabilities and superannuation of the parties (the asset pool).
- Assess and weigh the contributions of the parties, including financial contributions, non-financial contributions and contributions to the welfare of the family including any contributions as homemaker or parent.
- Assess the future needs of the parties, for example the age, health, income, property, financial resources of the parties and whether either party has the care of children under 18 years of age.
- Ensure the orders and percentage division of the property and the practical effect of the orders are overall just and equitable in the particular circumstances of the parties.
The second step requires the court to consider the “contributions” of the separated parties. Any property you owned at the start of your relationship falls within this category and is called an “initial financial contribution”.
How are the initial financial contributions treated by the court?
The court has considered initial financial contributions in different ways over the years, depending upon the circumstances of the case.
It is important to note that initial contributions are considered in light of other contributions made during the relationship as well. It is very rare for any property to be excluded from inclusion in the “property pool”, regardless of where it came from or whose name it might be registered in.
Here are some situations that might arise and how the court would treat it:
- If your ex made significant initial financial contributions: If your ex also made a significant initial contribution of similar value to yours or more, it will likely take the spotlight away from yours when the court determines who made the greater “initial contributions”.
- How the asset was used: If your initial contribution was applied towards the benefit of your relationship and increased the wealth of you and your former partner, your initial contribution may carry significant weight for you. For example, this may be the case if you previously owned a property worth $600,000, sold it during the relationship for $1 million and applied the proceeds towards the purchase of a home worth $1.5 million.
- If the value of the asset has increased due to the parties’ efforts: The Court has considered whether the value of an initial contribution has increased at all, and if so, whether it was due to a person’s physical contribution, for example, maintaining a farm, or whether it was by mere luck, such as a lottery win.
- The length of the relationship: If your relationship was relatively short in duration, the court may attach greater weight to your initial contribution. In contrast, it may have less weight attached to it if you had a long relationship, for example 15 years or more.
- If the contribution was kept separate: If your initial contribution was kept separate from your other collective property and particularly, if your relationship was short, the court may decide to look at the assets in isolation, which may result in you keeping the property. If your initial contribution was intermingled with other property, the court may take a different approach.
You and your former partner could even agree that you can keep your initial contribution, but if you are wanting to document that by way of a consent order that is filed with the court, you might find that the court will not allow that, if the decision is not “fair” in the circumstances.
To ensure you receive tailored legal advice about your entitlements to a property settlement, contact Michael Lynch Family Lawyers. We provide specialist family law advice and offer obligation-free initial consultations. Contact our office by calling: (07) 3221 4300 or by email: [email protected]