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Divorce- What to do when you can’t agree on the value of the assets

10 July 2014 4:08 pm Comments Off

In plenty of family law cases, spouses are actually able to agree on what the percentage division should be, for example, 50/50, 60/40 etc, but then find themselves locked into serious conflict over how that percentage division should actually be achieved. In these conflicts, the point of argument is almost always turns on the question of the value or price at which the asset is to be retained by one spouse or the other.

To assist in the resolution of these types of disputes, the following is a suggested “decision tree” which might be followed:

At the risk of stating the obvious, the items should be valued and then a comparison made between the value asserted by the Husband and the value asserted by the Wife.
Are the competing valuations from each side truly objective, or has one side simply plucked a (ambit/subjective) figure basically out of the air. By objective, we mean that reference has been made to independent evidence of values such as Red Book websites for motor vehicles, Gumtree, eBay or other online/public domain marketing avenues. If one spouse is working off a pure subjective guess then to the extent possible, they should be encouraged to redo the exercise by reference to independent evidence.
If the competing opinions on values are each objective per item 2, then consideration should be made towards jointly engaging an independent valuer. A “joint” valuation is usually not absolutely binding on the parties but it would be hard to argue against it. If a joint engagement of an independent valuer is not possible, then each spouse might consider engaging their own independent valuer with those valuations to then be exchanged and the spouses to thereafter consider “splitting the difference” between the two independent valuers.
Is pulling a “switch a roo” an option? that is simply saying to the other spouse “OK if I say the item I want to keep is worth $5,000.00 and you think it is worth $10,000.00 then you can take the item at $10,000.00 and I will just go an buy myself a replacement item with the cash payout you are paying me for my share of the original item”. When presented with this ultimatum, the spouse pressing the higher value for the item will often say “I don’t want it” and therefore be forced to either drop their assertion as to the value of the item or agree to go to a joint valuation arrangement. This strategy can also be used in the inverse situation however in that case, the spouse seeking to retain the asset would usually be expected to put up much more of a fight.
Is the replacement cost of the item greater than any “over the money” valuation the spouse seeking to retain the item is being asked to accept. If the replacement cost of the item is significantly greater than any “over the money” valuation then the spouse seeking to retain the item could well still be better off financially by accepting the over money payment but this will always be a question of fact and degree.
Can the “over the money” value be traded against any other “over the money” value that could be put against assets the other spouse is seeking to retain.
Under this option, one spouse is asked is to divide all of the relevant assets into two lists which are equal according to value and utility according to that spouse. After that division is done, the other spouse is then bound to choose one of the two lists. By this method, the spouse doing the division will want to be very sure that each list is as balanced and equally valued as possible because they will have no control over which is list is chosen by the other spouse and of course the other spouse then has not option to trade items. The process is quite brutal but in appropriate cases can nonetheless be an effective resolution tool.

Michael Zande is a Queensland Law Society accredited family law specialist with over 25 years experience in the field. He is the principal at Zande Law Solicitors, Suite 7, Norwinn Centre, 15 Discovery Drive, North Lakes. To contact Michael for advice phone 3385 0999.

The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take responsibility for any action readers take based on this information. When making decisions that could affect your legal rights, please contact us for professional advice.

Divorce and dividing up of Assets

28 November 2013 11:53 am Comments Off

Following the breakdown of a marriage or a defacto marital relationship, the separating couple will obviously need to tackle the task of dividing up their assets. With trust and respect running at an all time low and emotional distress often running at an all time high, reaching agreement on these issues often represents a real struggle. For those who just can’t reach an agreement, the Australian Family Court has the power to adjudicate on the dispute and make Orders to divide up the parties assets in a particular way. This process is called a “Property Settlement” but how is it done?

A property settlement dispute in the Family Court is always worked out according to a 5 step process.

Step1- Is it Just and Equitable:The Court must look at how the assets are currently owned/held and determined if it is fair/or unfair to keep them that way.This condition only becomes controversial in rare circumstances and is usually easily satisfied.

Step2- Value the Asset Pool:Here a Judge works out the value of the assets and liabilities available for division.Some important points to note here on this are:

Superannuation entitlements are these days treated as a divisible asset.
Some “annuity” pension entitlements can actually also be valued as being the equivalent to a lump sum capital amount.
Land and buildings are valued on the basis of what a willing but not anxious buyer would pay a willing but not anxious seller and can be valued by a registered valuer or Real Estate Agent in the event of dispute.
The value of businesses is usually determined according to what retaining the business is worth to the owner operator spouse and in the event of dispute can be determined by special valuers called Forensic Accountants.
Furniture is usually valued at garage sale prices.

Traditionally, each spouse was also at this stage given an opportunity to argue for the add back of any asset that was lost or diminished in value due to wasteful behaviour (for example, giving away matrimonial savings after separation to a third party out of spite) by the other spouse.Recent court decisions however, have suggested this process is more appropriately presented as part of Step 3.

Step3 -Assessment of Contributions:Here a Judge looks at both direct and indirect contributions of both a financial and non-financial nature over the entire period of the relationship. Assets contributed by a spouse at the beginning of the relationship or gifted to that spouse through a Will following the death of a relative or from the proceeds of personal injuries claims are all highly relevant and can often significantly impact on the final assessment.At the end of the process, the Judge assesses both spouses’ contributions usually in terms of a percentage against the asset pool determined from step 1, ie: a Judge concludes the proportions to which the husband and wife can be said to have contributed towards the creation of the wealth now available for division between the parties.

Step4- A Judge Looks at Future Financial Needs:Here a Judge is making a qualitative assessment of either the parity or disparity of the Husband’s and Wife’s future financial needs having regard to their respective:

ages;
health;
earning capacity;
ongoing obligations for the support of any infant children.

If a Judge considers there to be parity between the spouses then a Judge usually will not disturb the percentage division achieved from step 2 however, in the case of disparity then a Judge will usually adjust percentage entitlements up or down depending upon whether one spouse is now considered to be more or less financially needy than the other.

Step5- Justice and Equity:Under this step, a Judge is required to step back from the result achieved from steps 1 to 3 and determine if in his/her assessment, that result does adequate justice and equity between the parties.The application of this factor can be technical but two common applications of this step are:

making small adjustments to a percentage entitlement up or down so as to make it possible for a spouse (typically the primary care giver parent) to retain a home in which she/he and the children might reside to avoid displacing the children; and/or
determining the configuration of assets and liabilities to be taken by one spouse or another as their property settlement entitlements, for example, a Judge may conclude that one spouse should retain or receive a much greater share of superannuation dollars as part of their property settlement entitlements so as to deliver to the other spouse a much greater proportion of present day liquidable assets in cases where that spouse is more in need of money now and the other spouse is not.

Once the percentage entitlements are struck, the Court then generally endeavours to give each spouse the opportunity to retain those assets that they seek with either an additional cash payment if those assets total less than that spouse’s percentage entitlement or provision for a cash payment to the other spouse if the assets are more.

If both spouses seek the same asset then the Courts would generally order that the asset be sold with both spouses then at liberty to bid against the open market if they choose.

The information in this article is merely a guide and is not a full explanation of the law.This firm cannot take responsibility for any action readers take based on this information.When making decisions that could affect your legal rights, please contact us for professional advice.

Divorce – How do you pay for the Lawyer?

12 October 2012 3:13 pm Comments Off

Behind space exploration and warfare, it might seem hard to imagine any other endeavour that could be quite as expensive as Family Law litigation. Sadly, the financial and psychological impact of these forms of disputes are almost entirely negative and can affect some people for years if not decades. The good news is that statistically speaking, less than 5% of all family separations result in the necessity for the matter to be taken to trial and even that 5% reduces down to a much smaller probability when the warring parties choose to engage experienced Family Lawyers who are passionate about protecting their client’s interests.

Even when cases do not go to trial however, there is still usually some legal costs which each side of the separating couple will need to fund. So who does pay for the cost of these Lawyers:

Costs Orders – Section 117 of the Family Law Act states that each side to a Family Law dispute is to bear their own costs. A judge does have the power to order the opposing party to pay one party’s costs however, this only happens in very rare cases where it becomes patently evident that one party belligerently pressed on with litigation in defiance of reasonable offers to settle or based their case on a raft of lies which was plainly evident to be untrue even to themselves. Where a costs Order is made, there is scope for a Judge to order that 100% of the other party’s costs are paid, but more commonly the “standard” costs Order only results in around 60% of a party’s costs being recovered from the other side.

Government Assistance – Each State runs their own “Legal Aid system”. Entitlement to assistance is means tested. Full details are available on the Legal Aid Office website however, as an indicator single persons earning less than $38,000.00 per year with a home equity of less than $146,000.00 are eligible for fully funded assistance. Typically, though funding is not given to property cases and is restricted to cases where disputes over children’s arrangements are the only issue.

Can savings or other matrimonial assets be used to pay for the legal fees? – Generally, yes. If a spouse has access to a savings account in their name or another asset that can be liquidated, then it is definitely not a crime to use those monies to pay the cost for their own legal representation. There are however, obligations of disclosure and account. Generally, the other spouse must be informed as to whatever has been spent on legals and that money is usually added back to the asset pool as if it had never been spent. This is so the other spouse receives their fair chop of this money and, in doing so, is not made to fund their ex-spouse’s legal costs by subterfuge. If the other spouse is in control of all of the money or the assets, then an application can be made to the Family Court for a “Barrow” Order which can compel that spouse to pay over sufficient monies to fund the legal fees for the non-cashed up spouse. “Barrow” style arrangements can also be voluntarily negotiated between the parties. If a Barrow Order or arrangement has been made, the money paid over constitutes an asset in the hands of the receiving spouse to that value. That asset is then counted against their full property settlement entitlements when the final property division exercise is concluded.

The cost of funding a Lawyer in a Family Law case is undoubtedly a genuine worry. As stated however, the prospects of achieving a timely and a low cost settlement does often hinge on getting the high quality help that only a good Lawyer can provide.

Part 2 of this series will discuss how legal fees might be funded from cash flow, commercial lending institutions or the law firm itself.

Michael Zande is a Queensland Law Society accredited family law specialist with over 20 years experience in the field. He is the principal at Zande Law Solicitors, Suite 7, Norwinn Centre, 15 Discovery Drive, North Lakes to contact Michael for advice phone 3385 0999.

Long Distance Parenting

21 September 2012 9:40 am Comments Off

Considering the vast distances dividing Australia’s major population centres, the advent of high speed internet connectivity and the highly mobile nature of the Australian community as a whole, it is little wonder that the breakdown of family relationships bring many parents into conflict over where the now separated family is to live. Work commitments or career advancement opportunities after separation regularly put parents in need of moving to different towns or cities and many parents who previously agreed to move away from their home towns as part of intact nuclear family units understandably wish to move back for the support of extended family when the immediate family unit is no more.

When the parents cannot agree on these relocation issues, the Australian Family Court has the power to decide who can stay and who can go, but beyond these primary issues there are many other things to consider:

Who pays for the cost of seeing the children – there is definitely no principle in Family Law to say that the parent who moves away (with or without the children) must be the parent who is obliged to pick up the cost of the children continuing to spend time and communicate with the other parent who did not relocate. What Family Law principles do say is that each parent is duty bound to do everything reasonably necessary to ensure that children continue to spend time and communicate with both of their parents and consequently it continues to be a responsibility of both parents to pick up the added cost of long distance parenting, but only to the extent that it is reasonable to do so. What is reasonable of course depends on the facts of each and every case.
Impact of higher costs of long distance parenting on Child Support Assessments – if the relocated parent wishes, they can have the Child Support Agency consider reducing the amount of their standard Child Support Assessment to take into account the cost that parent is now paying to see the children for:
- transport
- accommodation
- telephone expenses; and
- internet and the like.

Like most things however, there are conditions:

the costs to be considered are only those costs which exceed 5% of the parent’s adjusted child support income;
food, clothing and entertainment costs are unable to be claimed; and
if the parent is only seeing the children between 52 and 127 nights per year, only transport costs can be considered. Accommodation, telephone and internet etc costs are all excluded.

Justification for the 5% threshold works on the assumption that the cost would be of an insufficient magnitude to peak above the usual ebb and flow of the day to day household living costs. The justification for excluding food, clothing and entertainment etc costs stems from the fact that these costs are part and parcel with the usual costs the parent would have been paying for the children whether at home or away. The restriction to transport costs only for the 52 – 127 night care arrangement is not readily explicable, but possibly stems from a concern to ensure that child support payments needed for children’s day to day sustenance costs such as food and clothing in the primary parent’s household are not gauged and diverted to pay for expensive hotel rooms.

Deductions for these costs from child support are not automatic, the claiming parent must make application to the Child Support Agency for a review of his/her assessment via the standard child support review process. In adjudicating on this decision, the Agency will give the other parent a right of reply and will require full documentary evidence to support all of the claim and again, will only allow those expenses which are considered to be reasonable in all of these circumstances.

Supervised Contact of Children

25 May 2012 1:27 pm Comments Off

Introduction

The area of residence and contact litigation is often fraught with highly emotional opinion. When involved in such litigation it is important to consider first and foremost the best interests of the children.

According to law in Australia, the children have the right of contact on a regular basis, with both their parents and with other significant people in their lives, so far as it does not overlap with their best interests. The Court is empowered to make orders only when it is satisfied that it is in the best interest of the child to do so. Such an order may include providing that a party have contact with a child or children only if that contact is supervised by another person.

What is Supervised contact?

Supervised contact is the situation where the non-resident parent (the parent with whom the child does not live) has contact with the child under supervision of another person. It is the responsibility of the supervisor to ensure that the best interests of the child are protected whilst on a contact visitation with the parent or person.

When can a Supervised Contact Order be made?

Before the Court makes or approves an Order it must be satisfied that to do so will be in the best interests of the child. Such a situation may include that in which there is a risk to the child that he or she may be abducted on contact, or there may be some risk that the child may be subjected to violence while with the contact parent or person. It can also include those situations where the contact parent has deficient parenting skills or requires the aid of another person to care for the child. For example, where the parent of a baby is a young man or woman who is not confident or able to care for the child by him or herself.

When will a supervised contact order not be made?

The Court will not make a supervised contact order if it is satisfied that there is no risk to the best interests of the child if such an order is not made. If the Court is not convinced of the reasonable need to ensure the safety of the child to have contact supervised it will not make or approve the order. For example, the Court will not make an order for supervised contact if it is satisfied that the only reason the resident parent is making the request is to annoy the other parent or cause them difficulties.
If contact, albeit supervised, is still contrary to the child’s bests interests.

How restrictive is a supervised Contact Order?

Supervised contact orders can be extremely varied. Depending on the particular set of circumstances they can be either very flexible or very rigid. An example of the flexibility of a supervised contact order may be allowing a young father to have contact with his young baby under the supervision of the father’s mother whilst at their home. An example of the rigidity of a supervised contact order may be requiring a mother to have contact with the child in a specially designated care facility under the supervision of a registered nurse. Clearly, the level of supervision will greatly depend on the individual case.

Is a Supervised Contact Order final?.

An Order for supervised contact is usually made for a specific period of time with the aim of eventually nurturing a relationship between the child and other parent to the extent that supervision is no longer required. If Orders have previously been made for supervised contact and the Orders do not provide that the supervised contact was to end at any specified period of time the contact parent can make a new application to the Court to have the Order varied.

Who can be a supervisor?

As long as the person who has agreed to be a supervisor has been found by the Court to be appropriate in the circumstances anyone can be a supervisor. The Court cannot nominate someone to be a supervisor if they do not want to. The prospective supervisor must be aware that should they agree to become supervisor they may be required to give evidence in Court should any disagreements arise out of the period of supervised contact. It can also be an extensive commitment of time. It is possible to have more than one supervisor appointed but all supervisors must be approved by the Court and specified in the orders as supervisors.

There is always the possibility that a child may grow afraid or suspicious of the other parent if supervised contact is ordered for no good reason, thus hampering the ability of the child and the parent to develop a warm and loving relationship. On the other side of the coin, however, it may be just as harmful to the child to allow them to go on contact with the non-resident parent without proper supervision. The decision of the Court to provide for supervised contact will therefore need to be based on objective and reliable information and evidence.

If you are concerned that supervised contact is necessary in your case for the best interests of the child, or conversely, that supervised contact will not be in the best interest of the child, you should talk to Michael Zande an Accredited Family Law Specialist who will be able to critically analyse your situation and give you the best advice.

The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take responsibility for any action readers based on this information. When making decisions that could affect your legal rights, please contact us for professional advice.

Time Wounds All Heals

29 March 2012 4:32 pm Comments Off

It is generally accepted that the grieving cycle of denial, anger, bargaining, depression and acceptance is the common emotional experience which follows the breakdown of a relationship.

Whilst for some, the grieving has been done “on the inside” for many years before informing the other partner about ending the relationship, for others, this news can be completely unexpected. For those persons, the natural reaction is to seek time to explore the possibilities of reconciliation, change and/or emotional adjustment.

Ideally, no decisions about division of parenting responsibilities for children, division of assets or even reconciling should be made whilst either party is under the heavy emotional influence of an incomplete grieving cycle and consequently the natural reaction often for both sides is to try to put off these uncomfortable decisions for as long as possible.

Unfortunately, there are many adverse consequences from inordinate delay. Below are a few examples:

Valuation of assets – asset values are not frozen at the date of separation but instead run with time and are only fixed at the date when the property division exercise is to be concluded by either agreement or imposition of Court Order. In an unstable market featuring either falls or gains the amount by which an asset might have appreciated or depreciated in value in the post-separation period and arguments about whether that fall or gain ought to be wholly quarantined or otherwise disproportionately shared between the spouses is an argument that can occupy a tremendous amount of resources and usually results in a very large legal bill.

Post-separation contribution arguments – another area which often becomes hotly contested in prolonged unresolved separations are arguments for reimbursement or contribution to the servicing of liabilities that might have been made wholly or disproportionately by one spouse over the other. The accounting required to persuade an unwilling spouse to make these contributions is immense and often becomes economically unviable ie. the personal time and cost of lawyers and accountants to assist in vetting and presenting the figures will often far outweigh the amount of money that is being sought for reimbursement.

Stale evidence – in many cases, evidence about highly relevant past historical events tends to erode, if not totally disappear over time. Persons memories fade about things, documents are misplaced or inadvertently destroyed etc. As a consequence what might have been a legitimate claim with strong prospects of success can be weakened to the point of being again completely unviable.

Limitation periods – for a de facto couple, the right to bring a property settlement claim expires after two years from separation and for a married couple, one year from the date of divorce. There have been many cases where spouses put off the “ugly” exercise of dividing up property in ignorance of the limitation period and were left either unable to bring a claim or with the task of convincing the Court to permit them to commence property settlement proceedings out of time. Occasionally, the civil standard limitation period of six years also applies where there are commercial transactions, (for example, loans between family members or business partners) which are not called up for fear of the emotional response and for which delay brings the same outcome.

Seige Mentality – a common example is occupancy of the matrimonial home – if one partner moves out and delays the news that the home has to be sold, the other can easily become deluded into the belief that they have permission to remain in the home until they are ready to sell according to their own timetable. Once these delusions take hold, the entrenched spouse can become very difficult to move.

Emotional Energy – resolving a Family Law case is very much like a marathon not a sprint. Delaying the start of that exercise however, is the emotional equivalent of jogging on the spot. By the time they actually start the process therefore, some are so emotionally depleted that they eventually run out of the energy needed to deal with the hard decisions and end up taking “whatever they can get just to get out of it”.

It can sometimes take an ex-partner months or even years to fully move through their grief. Whilst patience is an undoubted virtue, the above examples hopefully demonstrate how that virtue can in some circumstances end up costing very dearly. Whilst there are certainly occasions where pressing a Family Law claim in respect of either property or children’s issues can be enormously counter productive due to it being too soon after separation, leaving things too long can be equally, if not more devastating. When faced with this scenario, the good old “band-aid” rule probably best applies – unfortunately you just have to “rip it off”.

Change of name after separation

4:28 pm Comments Off

After the breakdown of a relationship people often wish to revert to a surname used before marriage and/or adopt a new surname on formation of a new relationship. In this situation questions also arise about whether children to a previous relationship can or should change their names to accord with the change of name after separation of one or both parents.

With the adults, the law and the procedures are relatively simple. The right to revert to the surname they used before marriage occurs automatically on the granting of divorce and any subsequent marriage to another person entitles use of the surname recorded on the Marriage Certificate. A change to any other surname can be legally effected by completing a form which is available from the Registry of Births Deaths and Marriages (“Registry”) website www.justice.qld.gov.au. Persons born in any other state of Australia however need to action the process through the Registry in their original home state. A surname can be changed to any other name provided the proposed name is not prohibited nor otherwise sought for a fraudulent/improper purpose – and – because we know some of you will ask, “prohibited” names are those considered obscene or offensive, too long, consisting or including symbols without phonetic significance, resembling an official title or rank or including a statement. For example, a name like “Save Mother Earth” or “Down With Capitalism” would be refused registration.

Changing the surname of a child has the potential to become considerably more involved.

Where both the biological parents consent to the change, a form from the above website can be used and a Certificate verifying the change of the child’s surname will issue. There is also the option to have the Birth Certificate altered to reflect the new name. If the child is over the age of twelve however, the child’s consent to the change of surname must also be obtained.

If parents cannot agree on the child’s surname then the parent seeking the change must apply to the local Magistrates Court for approval under Section 17(3)(c) of the Births Deaths and Marriages Registration Act 2003. A parent seeking to stop the change must apply to the Family Court for an Order prohibiting the other parent from referring to the child by any surname other than the name registered at birth.

In adjudicating either Application the Court will consider:

Any embarrassment or confusion of identity the child is likely to experience from either changing or keeping a surname; and
The effect it may have on the child’s relationship with the parent or other whole of half sibling; and
The overriding principle of the child’s best interests.

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