Inheritances and Family Law

Inheritances and Family Law

Families and money can sometimes be a volatile combination. This can be complicated especially in circumstances where a divorce or separation occurs and a new Will isn’t drafted to reflect the change of circumstances. In this blog, we review what it means to have an inheritance included in the asset pool of a separating couple.

Why is inheritance an asset?

When a separating couple needs to divide their assets, they must first work out the pool of net assets available for distribution. The pool includes all the assets and liabilities in each person’s name and in the parties’ joint names, as well as each person’s share of an asset owned jointly with another person.

If one person received an inheritance before or during the relationship, that inheritance would normally form part of the pool of assets available for distribution.

Does that mean my partner gets half my inheritance?

No, not necessarily. Just because an asset is included in the pool of assets available for distribution does not mean that the asset or the whole pool will be divided 50/50. Each matter is considered on a case-by-case basis.

Importantly, once the parties have identified what is in the pool of net assets, they must then consider what contributions they each made, and their respective future needs, in order to determine their respective entitlements and percentage split of the net assets they will each receive.

What are contributions?

When working out which party made what contribution, the Family Court considers the parties’ financial contributions – i.e., who earned what, the lump sums expended during the relationship, who bought what and who paid for what – and also non-financial contributions – such as being a homemaker and parent, physically renovating a home or landscaping a garden, managing the parties’ financial affairs, etc.

After a long relationship where there haven’t been any significant inheritances or other financial windfalls, a court usually finds that financial and non-financial contributions during the relationship are roughly equal, unless special circumstances apply.

An inheritance received by one party before the commencement of the relationship would be treated as an initial financial contribution by that person – i.e., money or assets that person brought into the relationship. Similarly, an inheritance received by one partner during the relationship is usually considered to be a financial contribution by that person.

In these circumstances, depending on factors such as the size of the inheritance, when it was received, what it was used for and the parties’ other contributions, this would generally mean that the person who received the inheritance would be treated as having made greater contributions during the relationship.

What about an inheritance received after separation?

This situation is less clear cut. A court usually considers an inheritance by one party as a sole contribution by that person. Generally, this will usually mean that the other party did not contribute to the post-separation inheritance and it should not be included in the pool of assets to be divided. However, each matter is dealt with on a case-by-case basis and while this may be a potential result, it is always dependent on the facts of the case and the circumstances of the lead up to the inheritance.

For example, if the post-separation inheritance had been received from the husband’s mother and the wife had a close relationship with her mother-in-law and had cared for her during an illness, a court might find that both parties had contributed to the receipt of the inheritance and therefore both parties will be entitled to a share of the inheritance.

Future needs

After working out financial and non-financial contributions, the future needs of the parties are assessed  before determining a split of the net assets and whether any adjustments should be made in favour of the party in need. Future needs include things like income, earning capacity, financial resources, ongoing care of children, age, health, etc.

An inheritance, even one received after separation, may be taken into account in this final step. The reason for this is the recipient of the inheritance would have greater financial resources and may be receiving income from an inherited investment which may well mean that person’s future financial circumstances may significantly outweigh the other person.  In such a case, a court may rebalance the division of the net asset pool in favour of the other partner by way of an adjustment which is derived from section 75(2) of the Family Law Act (Cth).

Summary

An inheritance received before or during a relationship will almost always be treated as an asset available for distribution between separating parties, whereas an inheritance received after separation will usually be found not to fall into the main pool of assets but may be treated in a separate pool. However, that does not necessarily mean that the other person is entitled to half the inheritance.

The receipt of a large inheritance will almost always have a significant impact towards the determination of contribution of the parties. In addition, an inheritance, including one received after separation, could have an impact on the determination of future needs of the parties and whether any adjustments ought to be made.

Finally, once the parties have been assessed as to the net assets, what contributions were made, whether there are future needs, a court is then required to determine whether the proposed split of net assets is just and equitable.

Contact us

The Family Law team at Etheringtons Solicitors are skilled at handling all matters relating to inheritances and are able to assist with complex cases in the event of a relationship breakdown. If you need assistance with any area of Family Law, do not hesitate to contact us on 9963 9800 or via our contact form here.

 

Family Law and Going to Court

Family Law and Going to Court

When a relationship or marriage ends, people often have a fear that they will need to go to court to deal with the separation of joint assets and liabilities, and arrangements for their children. The fear of going to court, on top of the emotional side of separation, can be extremely stressful for those involved.

Do I need to go to Court?

It is not always the case that people automatically need to go to court when their marriage or de facto relationship ends. If the parties to a separation can agree on how they separate jointly-owned assets and liabilities and also have an agreed co-parenting arrangement for  the children there is no need to go to court at all.

Do I need a Lawyer?

You will most likely need a legal document to be drafted to ensure that the agreement between the separated persons is clear, defined and legally binding. This is when a family law solicitor can assist you. Your family law solicitor will be able to explain to you the different types of documents that are available to set out the separation of assets and liabilities. You can also obtain such documentation to set out the children’s arrangements. The Family Law Act 1975 (Cth) sets out how these different agreements function.

There are different types of documents available to you, and your solicitor can also tell you what will work best for your situation. Once you have decided on the type of document you need, your solicitor will be able to draft the document to reflect what you and your ex-spouse have agreed, to ensure that it is clear and binding.

Why Should I get Legal Representation?

Each party will need their own legal representation before signing any documentation to ensure that they obtain independent advice.

Clients often find that once they have entered into binding documents drafted by their lawyer, there are fewer arguments between them and they can move on with their lives with certainty following their separation or divorce.

Contact us

The team at Etheringtons Solicitors are skilled at handling all matters relating to Family Law, and are able to assist with complex cases. If you need assistance with any area of Family Law, do not hesitate to contact us on 9963 9800, via email to [email protected] or enter your details in the form here and we will contact you.

Child Support Payments – What You Need to Know

Child Support Payments – What You Need to Know

The breakdown of a relationship or marriage can be emotionally daunting, especially when children are involved.  It is not uncommon for parents to be confused when the issue comes down to child support. According to the Child Support (Assessment) Act 1989 (Cth), parents have the duty to maintain their children in the form of child support payments.

What is Child Support?

Child support is a term used to describe the payment of money from one parent to the other for the purpose of helping the parent raise their children who are under 18 years of age. Child support is designed to help cover the expenses involved with raising children, such as food, clothing, medical costs, housing, school costs and costs related to other activities. All children in Australia involved in family separations, whether or not the parents were married to each other, are eligible for child support payments.

How is Child Support Calculated?

The Department of Human Services is an Australian Government Agency whom are delegated authority to decide on child support matters. They are required to consider the factors above before following the steps to calculate the amount of child support payable. In calculating how much child support is to be paid, there are various factors which are generally taken into account:

  • The age of the child
  • The income of both parents
  • The amount of time that the child spends with each parent
  • The level of care that each parent provides
  • Costs of raising the child based on independent research

You can use the Department of Human Services’ calculator to estimate child support payments here.

What If the Calculation is Unfair?

There may be circumstances where you may find that the calculation is unfair to you. This can occur in situations where one parent has arranged to minimise their taxable income, lost their job since an assessment was made, or a child has special needs.

In these circumstances, you may apply to the Child Support Agency to change the assessment. The Department of Human Services will consider the unique circumstances before amending any calculations.

What If the Other Parent Doesn’t Pay?

The Child Support Agency has the power to recover unpaid child support. They can do this through:

  • Income support payment deductions
  • Enforcing tax return lodgement or intercepting tax refunds
  • Working with third parties
  • Employer or bank account deductions
  • Issuing overseas travel bans
  • Litigation
  • Prosecution

Can I Organise Child Support Myself?

It is possible for parents to organise and manage child support themselves. This can happen when parents reach an agreement and mutually decide upon the amount of child support they will pay to the other parent. This can involve making cash payments to that parent or meeting payments of expected expenses directly. This arrangement can be entered into by way of a binding child support agreement, which is subsequently lodged with the Department of Human Services.

Contact Us

If you would like to discuss your family law matter with a legal professional please contact us on (02) 9963 9800 or via our contact form.

3 Tips You Need to Know When Choosing a Family Law Solicitor

3 Tips You Need to Know When Choosing a Family Law Solicitor

Family Law matters can be an emotionally daunting and a challenging experience for all parties involved. For this reason, it is extremely important that you choose a family law solicitor who will be able to provide you with valuable legal advice and assistance during this difficult time.

Here are 3 key tips which will better assist your decision making in choosing the right family law solicitor for your case.

1. Qualifications and Experience

When choosing a family law solicitor, you should always consider whether they have the relevant legal qualifications, experience and skills to handle your matter.

However, you should be mindful that a more experienced solicitor does not necessarily mean that they will be better suited to handle your matter, in the same way that a less experienced solicitor does not necessary mean they will be less suited for your matter. A solicitor who has been practising for a few years may be better suited to handle your matter if it involves less complicated legal issues, and as they will charge a lower rate than more experienced solicitors, you will save yourself money in the long run. On the other hand, a more experienced solicitor may be necessary for matters that are more complex.

2. Communication and Personal compatibility

When choosing a family law solicitor, you should consider whether you feel that you can effectively communicate with your solicitor. Whist it sounds quite basic and obvious, ensuring that a solicitor understands your story and instructions is of the utmost importance in any legal matter, especially in family law, where situations may be emotionally daunting and challenging. You should always feel comfortable enough to speak openly with your solicitor, without feeling judged or like you are a hassle to them. Some solicitors may also prefer face-to-face, telephone or email communication, so you would need to determine which method of communication works best for you.

3. Cost

When choosing a family law solicitor, you should consider their cost. While this relates to the level of experience of your solicitor, as discussed above, this is an important consideration within itself. Solicitors will charge based on their hourly rate. Whilst there may be unforeseen circumstances in your case resulting in unexpected work to be done, your solicitor should still be able to provide you with a rough estimate as to what you can expect to spend throughout the various stages of your matter.

However, you should be mindful that basing your choice on cost is not an effective way to find the most suitable family law solicitor for you. A solicitor which charges a higher hourly rate may be more efficient, taking less time and therefore less money in the long run. On the other hand, a less expensive solicitor may have a lower hourly rate because they are not as high in demand, but this may not necessarily reflect their level of experience, professionalism or dedication.

At Etheringtons, we try to ensure that our clients have an idea of costs throughout their matter, and we find that if there are no surprises when it comes to our bill, both our clients and us walk away happier at the end of a matter.

Contact Us

The list above provides you with a starting point in your search for the best family law solicitor for you. You should speak with a potential solicitor over the phone and meet with them face to face, if you can, before determining whether they should handle your matter. If you would like to discuss your family law matter with a legal professional please contact us on (02) 9963 9800 or via our contact page.

Prenuptial Agreements – What You Need to Know

Prenuptial Agreements – What You Need to Know

It has become extremely common for couples to enter into prenuptial agreements which is formally known as a ‘binding financial agreement’. The idea of talking about the end of your marriage before it has even begun can be rather daunting and intimidating. While no one ever plans for divorce, it can happen.

What is a Prenuptial Agreement?

A prenuptial agreement is a legal agreement made between the parties in a relationship which outlines how their property and assets will be dealt with in the event of their relationship ending in separation or divorce.

Prenuptial agreements can be signed by couples before they get married. If one spouse has significantly more assets than the other, or their parents have businesses or inheritance that they wish to retain if the marriage ends, a prenuptial agreement can ensure that all of these assets are protected. It is also possible to enter into a prenuptial agreement after a couple is married. For example, if during their marriage, one of the spouses’ parents win the lottery, the parents may wish for the inheritance money to be passed down to their child only.

In June 2000, prenuptial agreements were officially sanctioned by legislation in Australia to enable couples to think about and plan their future rights and responsibilities through a binding financial agreement. The ability to sign a prenuptial agreement extends beyond marriage and is also open to de facto and same-sex couples.

What Do Prenuptial Agreements Cover?

Unfortunately prenuptial agreements are not romantic. They are a practical way of ensuring both partners are protected in the event the relationship does not work out. The terms of a prenuptial agreement can cover a wide variety of matters including:

  • What assets are considered marital assets and what are non-marital assets. For example, the matrimonial home where the couple resides may be considered marital, but any assets bought by either partner prior to the marriage may be considered non marital.
  • What assets will be divided and in what proportion in the event of a divorce.
  • What will happen in the event of the death of one partner. In most states, your spouse will inherit a portion of your estate. If you do not wish for this to happen, this can be covered in the terms of your prenuptial agreement.
  • Anticipated changes in the future such as children. A prenuptial agreement can cover whether the terms will change if children are involved, whether they are to inherit all of the assets, etc.
  • A predetermined amount of spousal maintenance.

Prenuptial agreements do not cover custody of children or child support payments. Other provisions such as clauses about a person’s weight, frequency of sex, household cleanliness and infidelity punishments are sometimes included, but they are often deemed unenforceable. Prenuptial agreements are predominantly used for the financial arrangements of a couple.

How Do I Obtain a Prenuptial Agreement?

Australia has strict requirements for valid prenuptial agreements. If they are not drafted correctly, they may be deemed invalid by a court or completely set aside. For this reason, it is extremely important to engage a lawyer when drafting a prenuptial agreement. Spending a little money now is a much better option than engaging in litigation proceedings down the track for an invalid prenuptial agreement.

Can Prenuptial Agreements Be Set Aside?

Prenuptial agreements are generally legally binding. This means that if the agreement is signed by both parties, unless both parties mutually agree in writing that the agreement will no longer be binding, it remains binding on both parties. The other party can generally enforce its rights under the prenuptial agreement.

However, there are circumstances where the Family Court of Australia can set aside prenuptial agreements. These include:

  • Non-disclosure of assets/ financial resources
  • The Prenuptial Agreement was entered into under duress or involves unconscionable conduct
  • Children

The Court may set aside your prenuptial agreement on the ground of children if your prenuptial agreement does not make any provisions for your children or if there is an adverse change in the welfare of the children and the prenuptial agreement would cause hardship.

  • The contents of the prenuptial agreement are not just and equitable

Contact Us

There are various reasons why couples decide to enter into a prenuptial agreement. A prenuptial agreement is generally a great way to protect your assets, provide you with peace of mind and financial empowerment. However, as every couple is different, it important that both you and your partner freely discuss, agree and feel comfortable about the idea of a prenuptial agreement.

We cannot stress enough the importance of engaging a lawyer in drafting a prenuptial agreement. It is important to ensure that the agreement complies with all legal requirements so that you do not face invalidity of the agreement down the track. Our experts in family law are able to assist with these matters. If you would like to discuss your family law matter with a legal professional please contact us on (02) 9963 9800 or via our contact form.