Divorce Mean for Property Ownership?

Divorce Mean for Property Ownership?

Divorce is usually a traumatic and emotional process for many couples. Despite the sadness of the event, it is a common situation – roughly 1.9 per 1,000 people file for divorce in Australia every year. There is often a lot to take into consideration during a divorce, ranging from the custody of children to the separation of finances and possessions, but what does a divorce mean for property ownership?

When it comes to the legal, financial and emotional wrangling that is often part of a divorce it’s important to try to keep a level head. If you are able to maintain a civil relationship with your former spouse, it is likely to make the divorce much more straightforward. As with any legal matter, when it comes to changing the ownership of a property, it’s important to seek professional legal advice. A property conveyancer will be able to assist you and your former partner with the transfer of property ownership, whether it is to sell the property or to transfer the property title if one partner wishes to buy the other out. Jim’s Property Conveyancing has offices based in Brisbane and Melbourne and has a team of specialized, licensed professionals that can help you with any property issues.

Is there a divorce law?

‘Divorce law’ does not technically exist. Family Law is the set of rules and regulations that decide what factors will be considered when splitting assets after a divorce. Not all long-term couples choose to get married, so Family Law is a more inclusive term. It also covers de facto relationships – two domestic partners living together for two years or more. Even within the divorce umbrella, there are various different situations that could all equal different types of outcomes for asset splitting. There is, for example, separation under one roof – where a couple splits up but remains living in the same house. There are contests against divorce, where one person refuses to divorce the other person – this could spell out lengthy court periods. For the purpose of this article, we’ll be looking at a ‘typical’ no-fault divorce, defined by a married couple that separate for 12 months before filing for divorce.

What is marital property?

You’ve likely heard this term before when hearing about divorce. Marital property is not a technical legal term – instead, it’s a popular way to refer to all financial and physical objects that were acquired throughout the marriage. A house bought six months after you married and that both of you paid the mortgage for during your marriage would be marital property. Any car that you bought together could be considered to be marital property. Likewise, any debts or loans could also be considered marital property and belong to both of you. These all fall under the definition of assets. When looking at what divorce means for property ownership, the Family Law court will follow the four steps of property settlement. You need to contact property conveyancing Brisbane and get expert advice.

How does property settlement work?

Property settlement is designed to be a fair division of assets between both people. The four-step process of the settlement includes:

  1. Identifying all shared assets and what needs to be split – this will include valuing them. Your house will need to be valued at this time, and the court will use that figure to help them calculate the split.
  2. Looking at each person’s financial and non-financial contributions during the relationship – this includes inheritances, mortgages, rent-free accommodation, salary, redundancies, housework, childcare and more. The court may also look at any bad spending habits, like gambling or excessive drinking.
  3. After evaluating that, the court will determine the needs of each individual based on the above contributions, as well as their current income and earning capacity, the childcare custody split and any other factors that limit or promote making money.
  4. Finally, the court will split the assets based on their finding. This means it will not always be an equal 50/50 split but rather based on the person’s needs. They will issue a consent order based on this.

Can we decide what to do with the property ourselves?

Yes, you do not have to go to court if you don’t want to. The pair of you can create an informal agreement, which doesn’t need to be approved by a property lawyer or court. It’s also not enforceable by the court, so bear that in mind. You can also get a financial agreement made, which also does not have to be approved by the court but does have to follow strict guidelines. You will need a property conveyancer or a lawyer to help you with this.

Does it matter if only one person’s name is on the property title?

Sometimes there are sometimes tax or personal reasons that lead to one person in the relationship purchasing a family home or investment property under their name only, without using their partner’s name on the title. Other times, the property can be purchased from a trust or business account. Because it is an asset that was acquired during the marriage, it doesn’t matter whose name is on it, this asset will be treated like all other jointly owned assets when deciding on the settlement split.

As for any properties purchased before the marriage, it depends on how the asset has been managed during the marriage. It may still belong to the person who initially bought the house. However, if the pair of you have been living there during your marriage, and the other person has been contributing rent and utilities, it could then be considered a joint contribution to the relationship. There are no pre-determined rules in this scenario, and it will depend on your individual situation. The split will focus on your unique circumstances when being divided by the court or privately between the pair of you.

What to do next after the property settlement?

Once the court has determined the financial split, it’s time for you and your ex-spouse to decide what to do with the property itself. Your choice as far as what you do with the property is entirely up to you, although obviously will need to stick to either the financial agreement or consent order when deciding. You can:

  • Sell your property and split the profits as per the financial agreement. Selling the property allows the pair of you to have a ‘fresh start’ separately, and it has the potential to wipe away any remaining mortgage debt. If you live in a big family home, it gives you both the opportunity to downsize, move suburbs or buy something more suitable for your new lifestyle. A property conveyancer will be able to work with both of you to create a fair and appealing contract to maximize your financial benefit.
  • Transfer the property into one party’s ownership. This is an excellent option if you (or the court) have worked out an agreement where one party owns a more significant majority or all of the property’s value. You can work with a property conveyancer to transfer the jointly held property into one individual’s sole ownership. The person to be holding the new title will need to be approved by the bank to show that they are capable of paying back the loan by themselves. Transferring the property may sometimes include one party ‘buying out’ the other – paying a pre-decided amount to the other person to gain control of the property. Otherwise, it may just work out that way in the property settlement split – for example, one person gets the home, the other person gets other assets to make up a fair split. The benefit of choosing this option is that there are some tax benefits: you usually can claim an exemption from transfer duty and stamp duty when dealing with divorce orders or marriage annulments. Dealing with the intricacies of contracts is a very complex tax. Therefore, it is highly recommended to get a property conveyancer to handle the paperwork.

For advice about property ownership following a divorce, contact the team at Jim’s Property Conveyancing on 13 15 46.  You need to contact property conveyancing Melbourne and get expert advice.