Family Law: What does the ‘asset pool’ mean?

Perhaps, like actor Kevin Costner you are “having to participate in a dissolution of marriage action” or are in the process of separating from a de facto partner. Perhaps also like Kevin you are arguing with your ex about what your property settlement should look like. It is natural that when a relationship ends, one of the most important considerations for the separating couple (whether de facto or married) is financial or ‘who gets what?’. Knowing what the relationship ‘asset pool’ comprises of is essential to understanding your financial separation.

What is the asset pool?

The asset pool in family law matters is the overall net value of all assets, including property, vehicles, financial investments, and personal items. Basically, the asset pool includes everything in the name of both parties or the sole name of either party and any assets one or both parties’ ‘control’. This is because the Court considers that both parties make direct or indirect contributions to assets throughout a relationship.

This means that:

  • Your business, which your ex-spouse was not involved in establishing or running throughout your relationship, may be included in any property settlement;
  • Your inheritance may form part of the asset pool depending on the size of the inheritance and when it was received. In some cases, even a prospective inheritance may be factored into a family law property settlement if a party can show the prospective inheritance is sufficiently proximate to the other party to justify an adjustment based on future needs;
  • Trust assets (typically protected from third party claims) may be included in the asset pool to be divided between the spouses as part of their property settlement; and
  • Pensions and superannuation may be split by a Court order.

How are liabilities treated?

Debts and other obligations – secured or unsecured, such as mortgages, credit card debts and unpaid taxes are also relevant and play a critical role in property settlements. Once identified, the Court will deduct the value of the debts from the value of the assets which gives the net asset figure. Whether the debt is in the name of both of you or just one of you, may not affect your responsibility if the court finds the debt benefitted both you and your ex-partner. That said, sometimes a debt will be allocated to just one party. However, debt and who is responsible for it is a complicated thing, especially if a creditor does not recognise that responsibility for the debt has shifted to only one party.

Identifying ‘matrimonial’ assets

Identifying the asset pool is the first step in working towards a property settlement and perhaps can be the most crucial step as each person’s entitlement will be based on the final asset pool. As mentioned previously, assets or liabilities which are only in one person’s name will still be considered in the pool, even if the other party was not aware or were not involved in acquiring or maintaining it. If there is any dispute over whether assets should be included in the asset pool, the Court will decide.

There are obligations on all parties to any family law proceedings to provide ‘full and frank disclosure’ which means that all documents relating to each party’s financial circumstances must be provided to the other party. This can include bank statements, tax returns, financial statements for any entities, payslips etc. If a party does not comply with the requirement to provide this information, it can have a negative impact on the outcome of their property settlement.

How to value your assets?

The value of the assets for the purpose of family law negotiations will need to be considered at the time of the negotiations and not the time of the separation. If the value of any asset has increased between separation and the time of your property settlement, the current value will be included in the asset pool.

If you are satisfied with the financial documents your former partner has provided, you can rely on these to determine the value of an asset in the pool. This can be easy for certain types of assets and liabilities such as funds in bank accounts or credit card liabilities as the current balance can be taken from the latest statement.

For other types of assets, such as property or companies, one side will often provide their estimate of the correct value and put this forward for the other party to consider. If this value is not agreed to, an accredited third party can be jointly engaged to prepare a report. There are certain requirements for engaging a valuer for the purposes of family law proceedings which must be met for any report to be accepted by the Court. If these are adhered to, the report can be relied on during negotiations or in court proceedings.

What’s next?

Once you have an agreed upon asset pool, you can begin to consider how it will be divided between you and consider the weight of the financial and non-financial contributions of each party throughout the relationship.

If you require assistance negotiating your property settlement, please contact us on 1300 654 590 or email us for an initial chat after which we can help you develop a strategy for getting the best outcome for you in a property settlement.

 

The information contained in this post is current at the date of editing – 18 August 2023.

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