Falling asset prices, changed court procedures and a pessimistic future economic outlook are valid factors which may negatively impact the outcome of your property settlement. Within the context of the COVID-19 pandemic, you should consider whether it is possible to put your property settlement on hold. If you decide to continue with a property settlement, be aware of the risks in relation to asset valuations, and consider the following three points.
1. Use percentages for the division of your assets
The financial crisis caused by the pandemic has resulted in a sharp drop in the value of shares, property, interest rates and superannuation. There is a way that you can still obtain a fair division of the assets that are included in a property settlement by using percentage division instead of predetermined dollar value.
In the case of property, there is a risk that the sale price does not reach the expected value due to the current limitations on open houses and the cautious buyer sentiment. For example, if orders were drafted so that the sale proceeds of the family home were split where one party receives the first $150,000 and the other receives the remaining sale price, the parties would be disadvantaged if the house sold for less than expected.
The better alternative in times of economic uncertainty is to divide the sale proceeds between the parties by way of a percentage split. In the previous example, one could allocate 65% to one party and 35% to the other party. This is a more realistic approach and enables both parties to bear the risk of an unsettled economy. However, you should still seek financial advice from a professional as to whether it is the best time to liquidate your assets or sell your property.
2. Take advantage of alternative dispute resolution
Due to health concerns and social distancing, the courts have delayed hearing non-urgent matters, which may result in the prolonged delay of hearing your settlement matter. However, alternative dispute resolution options remain open, including mediation and settlement conferences. The options of negotiation and mediation settlements have opened more time and cost effective pathways to resolving property settlements during this time.
There are a variety of technological tools available to facilitate alternative dispute resolution including Zoom, Skype and telephone conferences. Ultimately, this means that parties in property settlement matters, including their legal representatives, are able to participate in mediations without putting themselves and the health of others at risk.
Once you come to an agreement, this can be finalised by way of consent orders filed in court. Currently, consent orders may be filed online with the court electronically. Most courts are not allowing in-person attendances due to the COVID-19 restrictions.
3. Wait to value your business
In light of the economic turndown and closure of many non-essential businesses, it may be best to place potential valuations of businesses on hold until the economy recovers. Even if you have experienced profitability in the previous years, it is likely, due to the pandemic, that losses have resulted from reduced demand, office closures, staff being let go or stood down (see our article on standing down employees here) and affected supply chains. Some industries have experienced profit during this time, and if this is the case of your business it could be the perfect time to seek a valuation. We advise that you seek financial advice as to whether this is the best option for you.
We know that a fast and cost-effective resolution is the most desirable in the circumstances. If you would like more information on how we can assist you with your property settlement matter or any other family law matters, do not hesitate to contact us on 9963 9800 or at [email protected].