One of the areas of Family Law that has been subject to a lot of academic commentary, debate and controversy in the Court is the topic of post-separation contributions.

Post-separation contributions can generally be defined as financial contributions that one party has made towards ongoing living expenses since separation.

Common scenarios that we come across as Family Law solicitors are as follows:

  1. I separated approximately 2 years ago from my Spouse/Partner and since that time I have saved approximately $50,000 in my bank account from my income since we separated. Does my Spouse/Partner have a claim to this $50,000?
  2. My superannuation has continued to grow since separation, does my Spouse/Partner have a claim to this growth?
  3. I separated approximately 2 years ago from my Spouse/Partner and since we separated I inherited $500,000. Does my Spouse/Partner have a claim to this $500,000?

While the above-mentioned scenarios are quite common, they can be quite difficult to answer as it may depend on your individual situation.

What are My Obligations?

Regardless of when you separated from your Spouse/Partner a Court would require you to disclose your true financial position as of now and not when you separated.

This leads to the common question “Why does he/she get a chunk of what I saved in my bank account since separation?

In 2015 the Full Court handed down a decision in the matter of Trask v Westlake [2015] (“Trask”) which is relevant to post separation financial contributions and is factually similar to Scenario 1.

In this matter the parties had been in a relationship for 13 years and had four children. The parties separated in 2009 and the trial did not take place until 2014. The husband was the breadwinner of the relationship while the wife was the homemaker and the parent. During the relationship the wife had made many sacrifices for the husband including moving overseas with the husband so that he could pursue his career opportunities. The property pool at the time of separation was approximately $7 million. However during the period after separation up to the point of trial the husband had accrued approximately $9 million from his work including from a redundancy payment.

The Court considered that during the period of cohabitation and post separation the parties’ contributions were equal but that there should be an adjustment of 10% in favour of the wife in consideration of the husband’s earning capacity for his ability to “bounce back”. This resulted in a 60/40 split in favour of the wife.

The husband appealed the decision and argued that the wife’s post separation contribution as a parent could not be considered as equal to his financial contributions post separation.

The Full Court in the Appeal said the following:-

“husband had arrived at his [career] position by dint of his talents, dedication and hard work but also by dint of the contributions made by the wife across the years preceding that employment.”  

The Court also said that whilst a calculation of the “percentage of the total value of the property represented by the husband’s post-separation cash injections…can be a useful measuring stick” the “assessment of contributions remains a matter of judgment and not of computation” because whilst the husband’s contributions could be quantified tangibly from his income, the wife’s contributions “are much less tangible” and “the lack of tangible recognition, or the fact that they are not susceptible to a dollar calculation, does not render them less important”.

The Court’s position in Trask was that you couldn’t attribute a dollar value to the non-financial contributions made by the wife regardless of how high the dollar value contributed by the husband was post separation.

The reasoning is the same for Scenario 2, referred to above, all of the superannuation accrued post-separation will be included in the asset pool to be considered for division by the Court.

Scenario 3, is a less common situation and there is currently some uncertainty as to how the issue of inheritance received post-separation is to be dealt with. Inheritance received after the date of separation will be dealt with in one of 2 ways by a Court. It will either be:-

  1. Considered as a financial resource which means that it would be excluded from the pool of assets by the Court but that an adjustment made be made in favour of the other party; or
  2. It will be included in the pool of assets for the Court to consider when dividing the assets of the parties.

Only recently there was a decision on 24 August 2017 in the matter of Holland & Holland [2017] FamCAFC 166 (“the Holland case”) which deals with the approach to be taken in matters where a party receives a post separation inheritance.

At trial, the Judge treated the inheritance received by the husband as a “financial resource” and made orders only for the division of assets the parties had acquired during the marriage but took into account that the husband had that “financial resource” at his disposal.

However, the Full Court disagreed and by excluding the property from the matrimonial asset pool, the trial judge made a fundamental error in principle which amounted to an error of law. Their view was that post separation acquired assets, including that of inheritance, are “property” which falls within the pool of assets to be considered for division under the Family Law Act.

Path 1: If you and your spouse/partner have $250,000 of net non-superannuation assets for example and you inherited $500,000 worth of assets post-separation and you hadn’t already formalised your property settlement with your spouse/partner the Court could consider the inheritance as a financial resource. What this means is that the $500,000 will not be included in the pool of assets but the court will note that you have this “financial resource” and it is likely that a Court will make a substantial adjustment on the $250,000 in favour of the party who does not have the benefit of the inheritance. There is even the possibility that that party could receive the entire $250,000.

Path 2: If you and your spouse/partner have $250,000 of net non-superannuation assets for example and you inherited $500,000 worth of assets post-separation and you hadn’t already formalised your property settlement with your spouse/partner the Court could consider that it is appropriate for the $500,000 to be included into the pool of assets therefore making the net pool of assets worth $750,000. However, the Court would then consider the significant “contribution” made by the party who received the inheritance and there will be an adjustment in favour of the party who received that inheritance.

The recent decision of Holland now indicates that a Court is more likely to adopt Path 2. If the courts continue to adopt Path 2 as the preferred approach, then it is likely that your spouse/partner would get a greater ‘slice of the pie’, than if Path 1 were followed.

How do I protect myself?

So, if you are the person in the relationship who:

  1. Has an income significantly higher than that of your spouse/partner; or
  2. You have a significant amount of superannuation; or
  3. there is a chance that you may receive a large inheritance

Then you should seek legal advice and aim to resolve and formalise your property settlement as soon as possible.

Our team of solicitors at Adelaide Family Law are experienced in matters such as these. We can provide expert advice tailored to your individual situation. If you would like more information then please contact our firm to book an appointment with one of our solicitors.

This article was written by Michael Ormerod of Adelaide Family Law and is of a general nature only and is only intended as a guide and should not be considered as legal advice.