How to divide property fairly in separation and divorce: Why 50/50 often isn’t considered fair in the eyes of the law.
Splitting things 50/50 is an idea that is deeply ingrained in most of us from childhood, but it’s often not actually the fairest outcome. Many separating couples make the mistake of assuming that they simply need to keep everything in their own names and split whatever they own jointly – without realising that one of them is being disadvantaged.
While this approach may be fine in some cases, fairness in separation and divorce has more to do with needs and contributions than whose name things happen to be in. One of you shouldn’t be disadvantaged, for example, if you’ve given to the relationship by caring for children and as a result had your ability to earn and retirement savings reduced.
Agreeing how to divide property can be an emotional process and it’s rare for even the most amicable couples to have the same perspective on things. To make sure you don’t get stuck in limbo, let’s look at the guidelines set out in the family law act and then walk through some practical steps you can take for getting to a fair financial agreement (also known as a property settlement) for your separation or divorce.
What’s fair according to the law?
When a court works out how property should be divided, they follow these 4 steps:
- Identify and value all of the property of the parties
- Assess the contributions of the parties
- Identify the needs of the parties
- Determine what a just and equitable division would be
So when it comes to working out what is fair, it mostly comes down to correctly understanding what is in your shared property pool and then considering the contributions and needs of each of you.
The shared property pool
This topic needs an article of its own, but in simple terms, pretty much all of the assets and liabilities that you and your ex-partner have should be considered in your shared property pool. This is regardless of whose name they’re in or whether you got them before or after your separation. This includes things like superannuation, interests in companies and trusts, and even assets and liabilities shared with a third party. When separating couples only consider things that are in their joint names (such as a house), they can end up with a division that seems ok on the surface but actually leaves one of them severely disadvantaged.
You don’t have to be earning the money to be contributing to the wealth of the relationship. Caring for children, being a homemaker or renovating property could be considered contributions. These could even come from your families, such as a gift or loan to buy your first home or looking after the children.
In general, the longer your relationship, the less contributions are a factor. For example, a relationship of longer than 15 years would typically be seen as a long-term relationship and the contributions likely considered equal. However, this always depends on the specific circumstances.
You’ll then need to consider your current and future needs. The most common needs that impact how you split your property are to do with your ages, your health, your ability to earn now and in the future and your responsibilities for caring for children. Generally, if one of you is worse off than the other when comparing these factors, then an additional portion of the pool is given to you to help balance this out. When it comes to needs, your access to other resources such as support from family or a future inheritance may also be taken into consideration when working out how a particular need should impact the way you split things.
How to do it
These things sound simple enough in principle, but in reality, separating couples often find it difficult to come to an agreement on them. One reason for this is that in Australia, our family law system is discretionary, which means that rather than having hard and fast rules for how things should be divided, it’s left to the discretion of judges to apply the principles as they think most appropriate for the circumstances.
This makes it difficult for amicable couples who genuinely want to do what’s right by each other but are unsure of exactly how to proceed. We’ve seen so many couples get stuck in a limbo where they have no clear plan forward for resolving things but are hesitant to resort to using lawyers. Let’s walk through the practical things that you can do to get to an agreement that is fair and you can both live with.
- Start with goals
- Know what’s in your shared property pool
- Don’t be positional
- Commit to self-determination
- Agree on a timeline
- Get advice
- Put time aside
- Listen first
- Stay future-focused
- Explore options
1. Start with goals
It’s important that you are both clear on what really matters to you, and why, so that you don’t waste time and resources in unnecessary conflict. There are usually a few big things that really matter, and then a whole lot of details that simply don’t. Taking some time upfront to think deeply and honestly about the future will put you in the right frame of mind to have the important conversations you’ll need to have. It will also give you a good sense of what kind of agreement you’d be able to live with if hard choices need to be made.
Separating couples often get so fixated on their disagreements that they fail to see just how much they actually do agree on. In mediation we call this ‘common ground’. As you think about the future, you might be surprised at just how much overlap you have with each other.
Finally, zooming out to the bigger picture will provide you both with a good perspective anchor. No matter how amicable you may be, there are going to be things that you don’t agree on. You’ll be aware of some of these already, and some of them won’t become apparent until you start trying to work towards an agreement. If you lose your sense of perspective, you’ll find things getting derailed quickly.
We have a needs and goals template you can access for free when you create a plan with Lumi, which is the world’s first separation and divorce robot. Get access to Lumi now.
2. Know what’s in your shared property pool
We talked earlier about the importance of needing to know what is actually in your shared property pool before considering how to best divide it. You can break this down to 2 questions:
- What do we have?
- What is it worth?
You’ll need to agree on a value for everything in your property pool. If you disagree on the value of something or are unsure, you may wish to get it valued. A common way to do this is for one of you to provide three valuers, the other to choose one and for both of you to split any costs.
And don’t forget that the property pool isn’t just about assets, you’ll also need to agree how you’ll split liabilities such as debts and credit cards. In fact, some couples have nothing but debt to split. Again, it may not matter whose name these are in and people are sometimes shocked to discover that they’ve contracted a STD (sexually transmitted debt).
We have a property pool template you can access for free when you create a plan with Lumi. Get access to Lumi now.
3. Don’t be positional
The fastest way for a conversation about property to hit a stalemate is for you to each start with a position that you then defend, hoping that the other will see sense and compromise. Once you’ve hit this point there’s not really anywhere left to go, which is one of the reasons that 56% of Australians take more than a year to sort out their property and 30% take more than 2 years (according to research from the Institute of Family studies).
A common trap that people fall into is to start with a percentage. This entrenches you into a position very quickly and changes the conversation from a rich discussion about needs, goals and options into a one-dimensional tug-of-war where you can only give or take. Use percentages as a sanity check as you explore options rather than an end in themselves.
By keeping an open mind and looking for those third alternatives that meet both of your needs and address both of your goals, you can keep a constructive conversation moving back and forth rather than becoming entrenched in positions and finding yourself stuck.
4. Commit to self-determination
Self-determination means that rather than having someone else’s decisions imposed on you (such as a judge), the two of you stay in control of the process and mutually decide how you’re going to move forward. Even if it takes some time to get there, agreements that you make together are more likely to work and allow you to move forward positively.
Commit up-front to resolving things between yourselves and be sensitive to how the other person is feeling. As time goes on, it’s not uncommon for one person to start feeling as though the other isn’t making the effort or isn’t genuine about resolving things. There’s often a window of time before one of you is driven to the legal route out of sheer frustration. You’ll need to actively work to make sure this doesn’t happen.
5. Agree on a timeline
One of the hardest things in separation and divorce is the uncertainty. Many couples we work with talk about this as “living in limbo”. One of the best things you can do is have a timeline that you’ve both committed to. Being able to see the light at the end of the tunnel makes a huge difference to your ability to reach it.
In the adieu process, we have couples agree on the process and put dates in their diaries for each session and task. This creates a real sense of relief for many of our clients who have been living with uncertainty but now have a specific timeline to work towards. You can learn more about the adieu process here.
If you prefer to do things on your own, we have a resolution roadmap that you can access for free when you create a plan with Lumi. Lumi is the world’s first separation and divorce robot. Get access to Lumi now.
6. Get advice
Good legal advice can be one of the most empowering factors for being able to agree things together with confidence. Many couples try to avoid lawyers altogether because they associate them with conflict and cost. In fact, in 2014, only 29% of separating couples did their property settlement with the benefit of legal advice. We think lawyers get a bad wrap and have a crucial role to play.
Self-determination supported by good legal advice is what you want to achieve if you can. Although you might think that having a single lawyer advise both of you is the obvious solution for an amicable separation, our adversarial legal system requires that you have independent legal advice. We created the adieu process because there just isn’t a good enough option available to amicable couples who want to get to fair and legally finalised agreements. We include independent legal advice as part of the process. Alternatively, you could also find yourself a good specialist family lawyer who’s trained in collaborative practice and make it clear that you want to resolve things amicably.
Although you shouldn’t become fixated on a percentage, you do need to know whether what you’re proposing is in the zone. A good lawyer can help you understand what is in the pool and how your contributions and needs apply to your situation. This will actually empower your commitment to self-determination as you’ll know where the boundaries are and be able to make better decisions for yourself.
7. Put time aside
In separation and divorce, I’ve learned that the natural state is for nothing to happen. That’s the default, and will be the result in your situation unless you specifically put time aside to have important conversations. We researched the experience of 50 separating couples and were amazed how even the most amicable of them went for months and years without ever having good conversations about the most important things. The right time just never arrives.
The only way to make this happen is to put it in the diary and make it a priority. You’ll need at least 2-3 hours together in a quiet, private space. You’ll also need to be clear on your property pool. I’d strongly recommend having a qualified mediator facilitate this conversation for you. This will give you the best chance of having a constructive, thorough conversation. They will also document your agreement to keep everyone accountable (you’ll also want to legally formalise this, but that will be the topic of another post).
In the adieu process, each session is facilitated by an accredited mediator and can be done in person or remotely via live video-technology.
8. Listen first
How well do you understand the needs, goals and fears of your ex-partner? What’s most important for them coming out of this separation? Why?
Your ability to have constructive conversations and find good solutions hinges on your willingness to listen first. To empathise. To acknowledge. A very common pattern we see is that one partner will create a spreadsheet with a proposal for a settlement early on in a business-like manner, which the other partner then either refuses to consider outright or nitpicks tiny details of. I believe this often has nothing to do with the details of the proposal itself and everything to do with its context. The other party feels rushed, pressured and dictated to, they’ve not been heard and haven’t contributed to it – they’ve rejected it before they even look at it; if they look at it at all.
Talk about needs before you get to numbers. Let them be heard. Until that has happened, you might find wheels spinning.
9. Stay future-focused
This is a conversation about the future, not the past. One of the key skills that we are taught as mediators is to constantly shift the focus back to the future to help unstick conversations that have drifted back to the past. It’s inevitable that old issues and feelings are going to come up in this kind of conversation, so you’ll need to be ready to bring the focus back the how you are going to move forward whenever they do. This is also another reason why having an accredited mediator facilitate the conversation is a good idea.
10. Explore options
Ultimately, you should approach this conversation is an exploration: How might we meet the needs we have with the resources available to us?
Be prepared to create multiple options. Be willing to see where an idea might go instead of shooting it down immediately. Your eventual agreement will probably look different to the first proposal that either of you puts forward. Straight out compromise may be required, but see if you can’t come up with a better option first.
If you want to try this on your own, it helps to use sticky notes with items and values on them. Move them around together and take photos of various options.
In the adieu process, couples create options together using a simple drag and drop interface, and then get real-time feedback on how fair and feasible each option is based on independent legal advice that’s been received. With the right groundwork in place, we often get to an agreement in under an hour.
Your next step
Although you’re sure to have some different perspectives on things along the way, following these steps with a mutual commitment to resolving things will give you the best chance of coming to your own agreement. Property settlements tend to get harder rather than easier over time so you’re best dealing with it as soon as you’re ready to move forward.
If you’d prefer to get started on your own, you can get free access to most of the tools I’ve mentioned by using Lumi, the world’s first separation and divorce robot. Get access to Lumi now.
To have professionals guide both of you through everything, you can now access the adieu process from anywhere in Australia.