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Wednesday, 10 August 2016

Two asset pools might not be better than one

Most family law property matters approach the division of parties’ assets by adding everything together into one ‘pool’ of assets and then dividing up the total value of that pool. However in certain circumstances, a Court may take a different approach where the facts support departing from the usual system.

One such case was the matter of Arthur and Arthur (http://www.austlii.edu.au/au/cases/cth/FamCA/2016/324.htm) , decided by Judge Rees in Sydney in May 2016. In that case, Ms Arthur was due to receive a sizeable - $535,000 – inheritance from her mother’s estate, her mother having passed away after the Arthurs’ marriage had broken down. The rest of the assets totalled approximately $800,000, meaning that this inheritance would have been a very significant factor in working out each party’s contributions, if it was included.
 
However Judge Rees determined that the inheritance should be kept separately and that Ms Arthur would be considered to have contributed 100% to that pool of assets, and that she should simply keep the inheritance. This was a practical way to deal with the matter, but had the effect of producing a note-worthy result in the rest of the assets.
 
Mr Arthur’s family had provided significant support to the parties during their relationship, transferring as much as 75% of a house to them without really expecting any payment back. In addition, the parties were allowed to live rent-free in the property for many years even though it was owned by family members of Mr Arthur.
 
Mr Arthur earnt significantly more than Ms Arthur, who had significant obligations as a carer and whose employment prospects were uncertain. Nevertheless, Mr Arthur received 80% of the non-inheritance asset pool. This is a high percentage of assets on a pool of this size, and Ms Arthur did not receive a larger percentage because she was going to have the benefit of the very large inheritance she had received and was going to retain, meaning the inheritance was a double-edged sword for her.
 
What does this mean for parties contemplating a separation? Look after your parents!

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