How do we solve economic disparity after a separation?

There is a general presumption that parties’ relationship property will be divided equally after a separation, if the relationship is greater than three years old. In some circumstances, however, equal division of relationship property may result in unfair outcomes.  The law may require unequal division of relationship property in certain circumstances, in order to balance out unequal financial factors that may result from the roles and duties that partners took on during a relationship.

What is economic disparity?

Economic disparity is where, following a separation, there is a significant difference between the income and living standards of the parties.  In order to qualify for unequal division, however, the economic disparity must have been caused by the way household duties and functions in the relationship were divided. 

Some examples of where economic disparity may result from the division of family responsibilities include where one partner takes time out of their career development in order to raise children, care for parents, take over household responsibilities, or to support the other partner’s career development (for instance by moving to a new location for a work opportunity).

When assessing whether there is economic disparity the Court will consider:

• the future earning capacity of each partner;
• the responsibilities each partner had during the relationship in caring for children; and
• any other circumstances that may be relevant.

How does the law compensate a party suffering from economic disparity?

If there is economic disparity after a separation, the Court has the ability to compensate the disadvantaged partner by ordering the other partner to pay them a lump sum of money out of the relationship property pool, or to transfer property to them.  

The Court will only compensate the disadvantaged party to the extent necessary to make up the differences caused by the division of responsibilities in the relationship.  There is no set formula, and the outcomes will have to be determined on a case by case basis.  Sometimes, parties can use experts to help calculate the appropriate amount required to fix the economic disparity caused by their different roles in the relationship.

How does it work?

In most circumstances, parties will agree between themselves, after getting advice from their lawyers as to how best to divide their relationship property.  This can include an agreement to divide property unequally, in order to compensate one party for economic disparity. 

If parties are able to reach an agreement, they can record that agreement in a binding and enforceable document. There are strict legal rules that must be followed in order to make the written agreement final and binding. 

Are there other circumstances where relationship property will be divided unequally due to economic disparity?

The presumption of equal division usually only applies to relationship property, whereas each party will retain their own separate property. 

Unequal division of relationship property may also be required to compensate a party suffering from economic disparity as a result of their contributions to the relationship, if the disadvantaged partner’s efforts or responsibilities during the relationship, contributed to the increase in value of the other partner’s separate property.

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.  At Rainey Collins we have an experienced team of family law specialists who can answer your questions and put you on the right track.