Welcome to Ivy Law Group's Podcast – The Family Five!
Many people are under the belief that assets are split 50/50 in a family law property settlement, but that's not always the case. In this episode, we talk about contributions and what they mean for a separating couple, and how it differs depending on how long they were together. For more on this topic, please see our articles below on the different types of contributions to a relationship:
- Initial contributions in a relationship and their impact on a property settlement
- Assessing contributions made during a relationship
- Are contributions made post separation still considered?
Transcript: If I contributed more in a relationship, does that mean I am entitled to more?
Jessica Hamilton (JH): Hello and welcome to the Family Five Podcast with Ivy Law Group where we tackle the tough family law issues in the time it takes you to drink your coffee. I'm Jessica Hamilton, I'm the Marketing Manager for Ivy Law Group, and I'm joined by my boss, Shane Neagle, who is the director of Ivy Law Group and the family lawyer extraordinaire. In this podcast, we will take a five in five approach, five questions in five minutes. Our aim is to keep the podcast light, easy to understand, and to give you some valuable information to take away with you.
JH: Hello everybody. We're back with another episode on this beautiful day. How are you Shane?
Shane Neagle (SN): I'm fantastic. And you, are you going okay?
JH: I'm good, I'm good. All right. So we're talking about contributions today. So many people are often under the belief that assets are split 50/50 in a family law property settlement, but that's not always the case, is it?
SN: It's rarely the case because of what we'll talk about (in a moment) as contributions and another thing called future needs and financial resources. Before I talk about family law, I want to talk about humanitarian law because I swallowed some chicken before and I was in here choking and no one came to my rescue. But anyway, getting back to family law...
JH: Excuse me, I feel like I need to defend myself here.
SN: You didn't know. Anyway, it's really important before we kick off to talk about the contributions aspect in that it differs in short and long-term relationships. For instance, in a short-term relationship, you wouldn't even go to the formulas about assessing contributions because normally what you come in with is what you walk out with. So if it's a two, three year type relationship, you don't get into that exercise, if that makes sense?
In Australia, we don't have a communal property approach to family law, like I understand (they do) in say, for example, Los Angeles, where I had a friend who went through a divorce and she was very wealthy there and assets that were acquired often off the back of her and her higher salary during the relationship, went to her unemployed international DJ partner, which she was never happy about. But they have a different system. That wouldn't happen here.
JH: So just before we go on to the whole contributions thing, you mentioned something about short-term relationships versus long-term relationships. Is there like an official definition to say, okay, well a short-term relationship is classified as three years or less, and a long-term is more than three years.
SN: So normally you would say a short-term relationship would be anything up to five years, a long-term relationship, 10, 12 years plus.
JH: Okay. So here in Australia, we have a contributions based model. So as I understand it, you've got contributions prior to a relationship starting, contributions during a relationship, and contributions post-separation. Do you want to walk everyone through those three areas first?
SN: What's really important to explain here, is about what contributions are considered to be. We've already talked at length and on the website, that there's four steps that the court approaches. The first one is to define what the assets are and the liabilities of the relationship. Second step is to work out contributions. Third step is future needs. And the fourth step is for the court to make a just and equitable property settlement.
So when we're dealing with number two, which is contributions, there's three main types of contributions. There's financial contributions, there is non-financial contributions, and then there's this thing called homemaker contributions, which is really important. First one, financial contributions. Are you ready?
JH:Always.
SN: What is important is the contributions of money towards the acquisition, maintenance or improvement of an asset at the beginning, throughout and at the end of the relationship. After it's finished, they can be made directly – these kinds of contributions such as the lump sum payment of a mortgage, or indirectly through your weekly earnings. Can I just say this? People think, oh, I paid for this mortgage and I paid for that. It normally all washes away. And what happens is someone brought in a million dollar home back 10 years ago, they'll get a weighting in their favour for that initial contribution. But in essence, those kind of contributions normally erode away because of a homemaker contribution that allowed the person to go out and make money.
Non-financial contributions, they relate to contributions of time and effort that a party has made to undertake in maintaining a property, mowing the lawns, fixing the gutters, who manages the property, etc, that can get weighted in the case.
Homemaker contributions is really important. I was a stay at home dad for a while early on and, and it was a big job, and if I wasn't doing it, we would've had to pay childcare. And so the court gives great weight to that and it usually equalises things out. And now there's a thing called special contributions, and that's normally someone like, we remember Kerry Packer. He could come along and say, well, my special entrepreneurialship to be able to make money, something that I should get an extra weighted contribution for.
JH: So do you have any examples that you can share or a case that might make it easier for people to understand how the contributions are split/divided/weighted in a settlement?
SN: What we see is: this is a stock standard type relationship. Someone brought in an asset 20 years ago that was $800,000, and the other person had nothing. They were together, they had children, the other partner didn't work. The one that made the major contribution worked. Near the end of the relationship, the person who didn't work ends up getting a $2 million inheritance right at the end or post-separation. Now, they had two children, the kids are adults now, that's your classic scenario.
Well, in that circumstance, the court has to weigh up, (now this is just going to go to contributions, we're not going into future needs, which is another step). So the court says, well, okay, hang on. Let's look at the size of the asset pool as a whole. Is that early contributing asset, was it a stepping stone to go on to buy other places? What's the size of the asset pool now? Now the court says, in the case of Jabber and Jabber, is that these kind of contributions are often eroded away over time in your normal longer 15, 20 year relationship. And therefore, the other contributions come in like mowing the lawns, the homemaker (contributions) and to equalise. Well, what about the inheritance? What happens is that second asset being the inheritance is almost excluded.
When the court considers an inheritance, the classic example I've given today normally relates to someone getting it post-separation, and the court in most cases will separate that asset over to belong to the person who inherited it. The court creates a separate asset pool and the person gets, you know, let's say a hundred percent contribution for that. What the court will do though, is with the other marital asset pool, let's just say it was a million dollars, then what it can do is make an adjustment to give the person who didn't get the inheritance a little bit more of that (from the marital pool).
JH: So I guess this is why you need a lawyer! Just as a side note: so it's no different if you're in a de facto relationship versus marriage when it comes to contributions. Is that right?
SN: Correct.
JH: Okay. Now, what happens if the court decides that you get 40%, your partner gets 60%, but you don't agree?
SN: If it was me, I'd cry and then I'd talk to the lawyers and then they'd say to you, well, look, a judge will take some time to publish their decision. You have 28 days to appeal that decision. The whole thing about family law is to bring about finality, and that's what the courts try to do. So people don't have to keep being intertwined in their assets. They get it all done so they can move on.
JH: Alright, so today we are talking about contributions. So why don't you contribute a joke?
SN: This is my 100% contribution. I have a scary joke about math, but I am too squared to say it.
JH: I think 60% like that joke. Bye everybody. Thanks for tuning in and don't forget to save us to your favourites wherever you listen to your podcast so that you don't miss an episode. It's important to note that the contents of this podcast are intended as a general guide to the subject matter. And if you are looking for specific advice about your individual circumstances, then we would recommend getting in touch with one of our friendly family lawyers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
