Dividing assets during a separation or divorce is one of the most challenging aspects of the process. It can be overwhelming, especially when emotions run high and financial decisions need to be made quickly. Aleena Mills, a family law expert and Partner at MBA Lawyers highlights key mistakes people often make during asset division and how to avoid them for a smoother, more equitable outcome.
Failing to Seek Early Legal Advice
One of the most common mistakes is delaying consultation with a legal professional. Aleena Mills warns, “Before you go making any massive financial decisions that would disturb the assets, go and see a lawyer.” Early legal guidance can prevent costly missteps, such as selling or purchasing assets without the other party’s consent. Seeking advice early allows individuals to understand their legal rights and obligations from the outset, providing clarity on how to proceed while safeguarding their interests.
Misunderstanding the Timing of Asset Valuation
Many people assume that the division of assets is based on what exists at the time of separation, but that’s not always true. “The asset pool is not what you have when you separate; it’s what exists when the case is settled or determined by the Court”, Ms. Mills explains. This misunderstanding can lead to poor financial decisions, such as spending funds, hiding assets, or even acquiring assets under the mistaken belief they won’t be considered later / after separation. To avoid complications, both parties should be aware that any post-separation acquisitions or disposal of assets may very well still be part of the final division.
Disturbing Financial Stability Post-Separation
A sudden halt in financial support can lead to legal consequences, especially if one partner has been the primary breadwinner. Mills notes, “Unless you’re absolutely stretched financially, you may wish to consider maintaining the status quo in terms of interim support to avoid spousal maintenance claims.” Maintaining financial stability not only ensures the well-being of children and dependents but also reduces the likelihood of spousal support disputes. Consistent financial contributions show goodwill and can positively influence settlement discussions. Of course, it is another story altogether if the level of financial support is simply untenable following separation. Every case is different and therefore the advice will be different depending on each set of circumstances.
Believing Asset Division is Always 50/50
The notion that asset division is automatically split evenly between both parties is a widespread misconception. Mills clarifies, “There is nothing in the Family Law Act that starts you off at 50/50. It’s a complicated process assessing contributions and future needs.” Factors such as income disparity, caregiving responsibilities, and each party’s contributions (both financial and non-financial) are taken into account. It’s important to avoid rigid expectations and approach the division process with an open mind, guided by expert legal advice.
Failing to Fully Disclose Assets
Transparency is crucial during asset division. Nondisclosure or underreporting of assets can jeopardise agreements and may lead to severe legal consequences, such as the setting aside of a settlement agreement. Mills emphasises, “Agreements can be set aside if there’s evidence of nondisclosure or misrepresentation.” Being upfront about all assets, including hidden investments or debts, ensures a fair and legally sound outcome, and is also a requirement under the governing legislation.
Ignoring the Long-term Impact of Financial Decisions
People often focus on immediate concerns, like who stays in the family home, without considering the long-term financial implications. Mills advises separating parties to consult financial planners early in the process. “A good financial support network, including planners and accountants, can help clients map out their future needs and ensure financial stability post-separation,” she says. Taking a long-term view helps avoid short-sighted decisions that may cause financial hardship down the line. A common issue Ms. Mills identified is where one party wants to retain the family home, however, the reality of their financial situation including the capacity to refinance the existing home loan, and service that loan on their own moving forward, is unachievable. In that case, maintaining a mortgage on an interim basis where neither party can afford to keep the property as part of their settlement may very well place undue financial burden on parties in an already stressful situation.
How to Avoid These Mistakes
- Consult a Lawyer Early: Professional guidance ensures you understand your legal rights from the start.
- Maintain Transparency: Full disclosure of all assets prevents future legal challenges.
- Engage Financial Professionals: Financial planners and accountants working with your family lawyer can help secure your financial future.
- Be Open to Fair Negotiations: Understanding that division is based on various factors will help set realistic expectations.
- Avoid Hasty Financial Moves: Hold off on major financial decisions until you’ve received proper legal advice.
Aleena Mills and MBA Lawyers advocate a balanced and informed approach, ensuring asset division is as equitable and smooth as possible. By avoiding these common pitfalls, separating parties can focus on moving forward with their lives, minimising conflict and financial strain.
Contact MBA Lawyers
If you are facing a separation or need assistance with asset division, contact MBA Lawyers for expert legal advice. Our experienced team, led by Partner Aleena Mills, will guide you through every step of the process with empathy, expertise and professionalism.