Are Your Assets as Safe as You Think?

Under the Family Law Act in Australia, parties to a marriage have one year to bring an application with respect to property matters after a divorce is finalised. Parties to a de facto relationship have up to two years after the date of separation to bring an application with respect to property matters. These time limits can be extended where the court accepts that to do otherwise would cause a party to suffer financial hardship.

Many people who have separated assume, having regard to common sense, that any asset they may acquire after separation is theirs alone and safe from any claim from their former partner. However, that is often not the case.

In the recent case of Holland & Holland, the parties separated in 2007 and divorced in 2012. Between the date of separation and the date of the divorce, the Husband received an inheritance. The Wife brought an application to the court more than a year after the date on which the divorce was finalised but was given permission by the court to proceed out of time.

One of the major issues in the case was the treatment of the Husband’s inheritance, which he received more than three years after the parties separated, and which had a value of more than $700,000.00. The trial judge took the view that, in the circumstances, that asset should be excluded. However, the Wife appealed this decision, and was ultimately successful.

The Full Court of the Family Court, in deciding the Wife’s appeal, made clear that it was wrong in principle to exclude any existing asset from the property pool. The court can take an asset-by-asset approach and consider various assets separately. However, in the particular circumstances of this case, it was decided that the Wife had a claim on the Husband’s inheritance. One point considered by the court was the fact that the children of the marriage had remained living with the Wife after separation, and her care of the children was considered a post-separation contribution.

There two practical points that we can take from this case:

1. Assets acquired after separation should not necessarily be considered “safe” from a claim by a former partner; and
2. The time limits for bringing an application with respect to property matters after a divorce or separation cannot always be relied on.

For both of those reasons, parties may be well advised to obtain a financial settlement as soon as possible after separating, both to obtain financial severance from their former partner that can be relied upon, and also to protect assets that they may acquire following separation.