With warmer days edging closer, southside residents are feeling summer ready! Looking forward to morning surfs and after work beach runs, we are gearing up to take our Princess Lil to the newly restored Hampton dog beach.
For those lucky enough to have a pool, it’s also that time of year where we make sure the water is sparkling and filter-clean ready for the warm season ahead.
As family lawyers, it is hard to hear the word ‘pool’ without automatically thinking of the phrase ‘asset pool’. If we had a dollar for how many times we heard that phrase during the day – well clearly, we love our job and would still be here working hard for our clients – but boy would we looking forward to a comfortable retirement!
That’s when it occurred to us that perhaps a handy blog topic discussing this notion of ‘asset pool’ would help others understand dividing finances post separation.
In most cases, the asset pool is a useful concept to work out a fair division of assets. You could also think of the pool as a bucket or pie. This is how it works: Add up the value of all the assets owned by each partner, take away the debts they owe to calculate the ‘net assets.’ Work out the percentage split of the net assets, and the mix of assets and/or liabilities that will make up their respective lots. And boom, there’s your settlement.
But there are so many scenarios that can make this approach potentially unfair or difficult at the very least. Some of them might include:
- At the end of a long relationship – and after many ‘ups and downs’ – a couple has no assets. One of them inherits a property after separation. Does the non-inheriting spouse miss out because there is no asset pool to divide?
- A mature couple who separate, have a family home and superannuation in Australia to divide between them. Each of them has property and investments overseas. Are the overseas assets in or out of the asset pool?
- A woman owns her home (subject to mortgage) when her partner moves in with her. They live together for 25 years and raise a family. Her partner is injured in a workplace accident and receives a substantial compensation payment. Is the compensation payment in or out of the pool?
The difficulty in many of these cases includes different assets in the same ‘asset bucket’ – like comparing apples and oranges, or even oil and water – they just don’t mix.
Now I love a banana smoothie. Many people do. Add some strawberries, hmm ok. But how would you like peanut butter in your smoothie? Works for me, but my partner gags at the very thought.
When we negotiate settlements on behalf of our clients, there are often arguments about whether peanut butter goes into the banana smoothie. More technically, whether a particular asset or assets go into the asset pool.
The beautiful thing is: You don’t have to agree on the asset pool!
In fact, the words ‘asset pool’ don’t even exist in the Family Law Act (also known as the Bible for family law in Australia).
We frequently come across clients or opposing lawyers who are hung up on this notion of what is ‘in’ and what is ‘out’ of the asset pool post separation. We recently had a case where our opponents refused to mediate unless we agreed on their version of the asset pool!
One thing I’ve learned over the years is that when it comes to travelling, the journey can be as important as the destination. But when it comes to property settlements, it’s all about the outcome – not the pathway that gets you there.
If you’ve got to drive to a barbecue and you know your destination, you will end up at the same place whether you get there by following your SatNav, asking Siri or consulting your Melways. Many heated arguments are had when driving into unfamiliar territory about the best route, and the back-seat driver will never be happy with the choices of the person in the driver’s seat. But if you get there in time and don’t miss out on the steaks, and the beers are cold, it’s all good.
What is important in family law settlements, and what the court will decide should the issues get that far, is finding an outcome that is just and equitable. It is the destination that is important – the just and equitable outcome. Not HOW that assessment is reached.
Whether a gift/inheritance/compensation payment is treated as being in or out of any asset pool, we can end up with the same result. At a recent mediation, we were negotiating a settlement where the main assets were a family home, a term deposit, cars and the balance of a compensation payment (received by our client). Our mediator suggested that the outcome if we included the compensation payment in the pool should be a 60/40 split in favour of our client, but if the compensation was treated separately and retained by him then the other assets should be divided 60/40 in favour of the other party. Either way, there was a similar result. A thorough understanding of the relevant arguments will enable a good family lawyer to negotiate a client’s best result via various alternate pathways.
It can definitely be advantageous to follow a particular pathway, but if a case proceeds down a different path then it’s important to know the pitfalls and opportunities that lie down that road. At Bayside Family Law Solutions, our lawyers have the expert knowledge and experience to know the highways and byways, and the twists and turns in each of them, to safely navigate your case and to achieve a great result.
If you are feeling a little confused or vulnerable about what could and should happen to your financial interests post separation, we are here to help.