When a couple is divorcing or separating, the division of assets is often a key concern for both parties.
The process of dividing property can be daunting and legally complicated, so it is important that you have an experienced family lawyer to ensure that your needs are being catered for during the settlement.
In this article, our lawyers explain how assets are divided following a separation and answer the following questions: what is a financial resource, what is property and how the difference can impact settlement proceedings?
How Are Assets Divided After a Separation?
A separating or divorcing couple will often arrange the way in which their assets, finances and liabilities will be divided moving forwards.
Depending on whether the couple is able to come to an agreement on their own terms, this arrangement can be made with or without the Family Court’s assistance.
As part of this settlement process, the couple’s ‘property pool’ will be evaluated, including items of value such as:
- The family home
- Motor vehicles
- Business interests
When it comes to these assets, the way they are categorised by the court can have a significant impact when it comes to the splitting of assets. This is particularly true in the case of a ‘financial resource’ vs ‘property’.
It is important to note that if the Family Court does become involved in this process, they will determine the splitting of assets on a case-by-case basis, considering factors such as each party’s contribution to the property pool, and each party’s future needs, ensuring a just, equitable outcome.
What is Property in Family Law?
Section 4 of the Family Law Act 1975 defines property in stating that:
“Property, in relation to the parties to a marriage or either of them, means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.”
This means that property can include items such as:
- The family home
- Real estate
- Boats and cars
If something is categorised as property by the court, it is included in the property pool available for division between the parties.
What is a Financial Resource in Family Law?
Unlike property, what constitutes a financial resource is not specifically defined in the Family Law Act and is a fairly broad concept. So, what is a financial resource?
Typically, a financial resource is something which is not considered property to be included in the asset pool. Instead, it is a factor to be taken into consideration by the court as it offers future financial benefit to one party.
In essence, a financial resource is an asset that can be used for the purpose of generating income. This means that a financial resource is something from which a person can draw financial or monetary resources, including things like:
- Future pension entitlement
- The capacity to borrow money
- Loan agreements
- Anticipated inheritance
In some cases, a court may also consider other items a financial resource, such as an inheritance which is not expected to be inherited for some time.
This means that the key difference between a financial resource and property is that a financial resource has the potential to generate future income or assets, while property does not.
How Does This Affect Property Settlements?
When it comes to the division of assets after separation, your lawyers may want to classify certain items as property and certain items as financial resources.
The reason for this is if an item is classified as property, it is subject to being divided between the parties, whereas if it is classified as a financial resource, it may not be subject to division.
The court may decide that it is fair for one party to receive a greater share of financial resources than the other party, based on factors such as each party’s future needs and their contribution to the property pool.
For example, if one spouse owns a business which is classified as a financial resource, the court may decide that this spouse should retain ownership of the business, as it provides them with income and security.
In contrast, if a holiday home is classified as property, it would be subject to a sharing regime and would likely be up for division.
Need Help With Determining What is a Financial Resource vs Property?
If you are going through a separation and need legal assistance in regards to a property settlement, or more details about what a financial resource is, our team of family lawyers are here to help. Our team is highly experienced in all aspects of family law, from divorce & separation to property settlement and time with children. Please contact our team via email or by phone to discuss how we can assist.