What is the Four Step Process?

In simple terms, the Family Court can only make decisions about changing property rights if it is deemed fair to do so. This rule has been around for a long time under the Family Law Act 1975 (Cth), but it gained strength through the Stanford & Stanford decision by the High Court of Australia. Many people assume:

1. A couple’s property rights should be different from legal and equitable titles.
2. The Family Court should automatically consider a 50/50 split of property.

This isn’t necessarily the case.  If the Family Court decides it’s fair to get involved, it follows a Four Step Process:

Four Step Process: Step 1 – Identify and value assets, liabilities and resources.

The first step is to identify the assets (things you own) and liabilities (debts, things you owe money on) you and your former partner own.  This is called your asset pool.

The property to include in your asset pool is any assets either you or your former partner own at the time you make your property settlement agreement.  It doesn’t matter if the asset or debt is held in your sole name, your former partner’s sole name or in joint names.  If it exists at the time you make an agreement it should probably be included.

Your assets include things you own like real estate, cars, bikes, boats, camper vans, bank accounts, shares, investments, superannuation, jewellery and personal effects.

Your debts might include mortgage debts, credit cards, car finance or personal loans.

To assist you in compiling your asset pool, each party is obligated to complete full and frank disclosure.  To discharge your disclosure obligations you need to ensure your former partner is aware of all of your assets, liabilities and financial resources.  You can do this by exchanging financial documents such as bank statements, tax returns, credit card or loan statements etc.

The Court publishes a brochure about your disclosure obligations which you can access here.

You should identify the current value for each asset or debt.  For assets, the value should be current market value.  For debts, the value should be the current amount outstanding.

To value real estate, consider obtaining three market appraisals from local real estate agents.

Sites like Redbook can be used to assist in determining the value of vehicles.

If you and your former partner can’t agree on a value, a formal valuation might need to be obtained.

Four Step Process: Step 2 – Consider contributions.

The history of the relationship should be considered to take into account the contributions made by each party at the commencement of the relationship, during the relationship and since separation.

Contributions can be classified as financial or non-financial.

Financial contributions can include income from wages, inheritances, personal injury payouts, investment profits etc.

Non-Financial contributions can include parenting responsibilities, homemaking duties, caring for sick or injured family.

Adjustments can be made to either party depending on each party’s respective contributions.

Four Step Process: Step 3 – Consider future needs.

An evaluation of the future needs of each of the parties and any children under 18 needs to be completed.

This requires consideration of each party’s current and future income earning capacities and employment arrangements.  Other factors to consider include the health of each party and whether any foreseeable health issues might impact a party’s ability to earn income in the future.

The ongoing care and support of children under 18 is another important future needs consideration.  Also whether either parent is making child support contributions.

Again, adjustments can be made to either party based on either party’s future needs.

Four Step Process: Step 4 – Is the division just and equitable?

The final step in the Four Step Process is to consider whether the proposed division of property is just and equitable to both parties in the circumstances.  Dividing property following separation is an inexact science and there is always a zone of possibility in each case that would result in a just and equitable property settlement.

The proposed division of property should result in a fair settlement that results in the financial relationship between the parties coming to an end.

If you are unsure how this applies to your situation, call us now. While the Four-Step Process seems straightforward, seeking professional legal advice is recommended to cover all bases. Our experienced family lawyers can guide you through your best options.