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Delaying the division of relationship property often results in serious unexpected issues…
When a couple separates, there are a lot of practical things to sort out. Because separation can be complex, parties sometimes take a long time to separate their incomes, expenses and bank accounts. Delays in getting advice, so that property division can be dealt with more swiftly, may result in increased complexity in the long run.
Property may change value
It is very likely that property will increase or decrease in value as time passes. It is important to note that the value of property as at the date of division (by Court Order or agreement) will be used to determine the overall division of property. With the passage of time, division could look quite different at one point in time compared to a different point in time.
By way of example, let us assume that at the time of separation there is a family home worth $1 million and shares in a business worth $1 million.
The parties have talked amongst themselves and decided that party A will retain the family home, while party B will retain the business. The parties do not formalise their agreement for some time.
Due to a combination of wide economic issues and some risky business decisions that did not pan out, 7 years later the value of the business decreased to $500,000.00. In the meantime, the family home has increased in value to $1.2 million.
If the parties formalised the division of their assets at the date of separation, they would have received equal value without the need for a balancing settlement sum. However now, 7 years later, party A will need to pay a sum of $350,000.00 to party B in order to retain the family home.
A visual representation shows this difference even more clearly:
|
Property (2012) |
Party A ($) |
Party B ($) |
|
Family home |
1,000,000.00 |
0 |
|
Business |
0 |
1,000,000.00 |
|
Total each |
1,000,000.00 |
1,000,000.00 |
|
Settlement required for equal division |
0 |
0 |
|
Property (2019) |
Party A ($) |
Party B ($) |
|
Family home |
1,200,000.00 |
0 |
|
Business |
0 |
500,000.00 |
|
Total each |
1,200,000.00 |
500,000.00 |
|
Settlement required for equal division |
-350,000.00 |
+350,000.00 |
To avoid unexpected changes in circumstances resulting in unexpected outcomes, it is best to get legal advice early on so that you can formalise the division of property. Otherwise you may live with a degree of uncertainty about the value of your share.
Read more about how to formalise the division of property after a separation.
Read more about the date of separation.
Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.
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