I now provide three examples applying the four step approached discussed in my previous post as to how the Family Court applies the approach in real-world situations.
Husband (“H”) and Wife (“W”) are married at the age of 24 years. H is a qualified professional. W also has professional qualifications and both parties have the same income and earning capacity at the commencement of the marriage:
- neither H nor W make any significant financial contributions to the marriage at this time;
- W works for two years and then has the family’s first child;
- W, in agreement with H, does not return to the workplace;
- three years later, a second child is born;
- W has full time care of the children until they are of age to attend school, at which time W is 35 years old;
- W, for the next ten years works part time to accommodate the children’s schooling so she can care for them before and after school;
- H builds a highly successful business.
After twenty-one years of marriage, H and W separate. At the time of separation, the children are both over the age of 18 years and the net asset pool of the marriage totals $10 million.
The Family Court will first determine the extent of the parties’ financial and non-financial contributions and also the contributions as home maker:
- Given W earned a modest income due to her part time employment (say $50,000 per annum), her contribution would be assessed at say, ten percent of the asset pool. On that basis H should receive $9 million and W $1 million;
- W had the majority care for the children, including both limiting her time at work, and in acting as primary home maker. No doubt, H would have assisted in caring for the children by occasionally taking them to school or preparing school lunches etc., but if H was a dedicated business person as required to build a successful business, his contribution as home maker may be negligible as was the wife’s financial contribution and a 90/10 split in W’s favour is not uncommon in these circumstances.
Section 79 of the Family Court Act 1975 (Cth) provides that the Court can take a number of considerations into account when making a property split and in this case, the Court would make a 50/50 split of the asset pool despite the disparity of contribution by both parties in respect of the respective considerations.
However, the Court must also take into account the Section 75(4) factors and those factors such as:
- The length of the marriage (a long marriage in this case);
- The income potential of the parties (W has limited potential given her age, time out of the profession, need to study/update);
- If the children were minors, the continued care of the children; and
- The Health of the parties.
Assuming the parties are equally healthy and the children of the marriage are adults, because of W’s age and the disparity in income potential that has arisen as a result of her role as home maker, the Court can make an adjustment to the 50/50 split in favour of W.
In this case the extent of the adjustment may be as little as five percent or as great as fifteen percent, in which case W could receive between 55% – 65% of the Pool.
The Court has a further discretion to make a further adjustment of the split if it deems it just and equitable to do so. For example, if H deliberately prevented W attending classes to update her training to assist her career by refusing to contribute to the costs when W was able to partake in such training.
- If we change the facts as follows: H and W do not have any children during their 21 years of marriage;
- W works at H’s business for three years, however, W’s qualifications are not utilised by the business; and
- Other than that, W choses to be a stay-at-home wife who cleans the house and prepare the meals;
Based on the above facts, it is doubtful that W would receive greater than five percent of the pool considering her insignificant financial contributions. There may be a similarly small adjustment for her role as home maker – again, say five percent;
However, the Section 75(4) factors may become more significant. One factor being the life style and standard of living W has come to enjoy over the course of the marriage. The $1 million that W may receive may not be able to sustain that standard, which may result in a further upward adjustment in W’s favour. Further, while W’s income potential is no less than it was when she had children, its significance is greater as W cannot rely on the support of children should the need arise. H may find that a further adjustment in W’s favour could be made for this reason.
Finally, let us take away the children and assume at the time of marriage W was 20 years old and H was 55 and H brought $5 million into the relationship. After ten years of marriage the couple separate and the pool has assets of $10 million.
W’s age at separation is a less considerable factor as she is young enough to commence a career and undergo further training. Further, H’s age is obviously a limiting factor with regard to his income earning potential.
While W may get awarded a five to fifteen percent of the pool, the Court may adjust that figure in H’s favour given retirement age and consequential lack of income potential. It would suggest that W would be doing well to receiver an amount greater than say, seven percent.