One of the biggest arguments that prevail during divorce procedures is about property settlement. Both parties would naturally want to retain as much of their personal assets as possible and gain a fair amount from the co-owned property. One common contention that arises has to be regarding personal injury claims that have been awarded to one of the ex-spouses. Both the exes would want to claim as much of the awarded amount as possible. It is up to the two parties, their lawyers and the court to create as just and equitable a division as possible. A good lawyer, like one of those in Maatouks, can make a lot of difference when such cases arise.


The Family Law Act’s Property Settlement Procedure

The Family Law Act 1975 sets certain guidelines in relation to property settlements in the event of a divorce or separation. Sections 79(4) and 75(2) pertain to the rules in the case of the breakdown of a marriage while sections 90SM(4) and 90SF(3) are for the cases of the breakdown of a de facto relationship. The general rules and considerations are mostly the same.


When evaluating the property held in the marriage by both parties separately and jointly, the elements that are considered are:

  • The assets and liabilities of both ex-spouses held separately and jointly
  • Direct financial contributions made during the relationship in terms of any type of earnings
  • Indirect financial contributions made during the relationship in terms of inheritance or gifts received
  • Non-financial contributions made during the relationship in terms of managing the household, children and other family members, any business and investments


Financial contributions will also include personal injury payouts.


The court will also decide if a property settlement will be required at all or not. They may decide against it in cases such as:

  • When the relationship was very short and the finances or the two parties are not as intermingled
  • If the ex-couple themselves kept their finances independent from that of each other
  • When the asset pool is too small to require a formal division
  • When the couple has been separated for a long time and their finances have gotten separated naturally


When deciding asset division in property settlements, the financial, non-financial and labour contributions of the members involved will be assessed. Labour contributions simply refer to the involvement of a person as a homemaker or parent during the relationship. The timings of these contributions are also important. Contributions made at the start of the relationship, known as initial contributions, are what a person brings into the relationship that they already possessed before. In long relationships, these are usually balanced out by the other person’s contributions and hence do not have the same value as they initially did.


All contributions made during the relationship are included in the asset pool unless it is a completely personal asset that the other person has nothing to do with. Personal injury payouts come within this bracket. In that case, the court will decide separately if it should be included in the asset pool. The timing of receiving the payout and the contribution of the other person to your recovery and assistance plays a part in this decision. Contributions made post-separation may be kept out of the asset pool entirely or considered separately for division.


The future requirements of each party are also taken into account during the settlement. the most important factors that are considered include:

  • The health and age of the members
  • The income, assets and financial resources of both
  • The physical and psychological capacity of each person to hold employment in the future
  • If any of the members have dependents to support, especially any children they may have who are minors


The court will also discuss if the property division thus decided is fair and equitable or not for both parties. Appeals can be made for further adjustment if one party is not happy with the division.


Settlement of Marital Property and Compensation for Personal Injury

In general, logic dictates that personal injury compensation payouts should be left out of the asset pool for property settlement after a divorce or separation since the amount was specifically for the aftermath faced by the victim of the incident in question and not their spouse or ex-spouse. However, that is hardly ever the case. Several other factors are always intricately connected. For example, the spouse may have had to take time off to take care of the person. They might have made contributions to accommodate the modified needs of the person after the incident. As a result, they could claim a portion of the payout as compensation.



Property Divisions and the Five-Step Test

There is a set procedure under the Family Law Act for property settlement procedure. It includes a certain number of steps to ensure the thorough consideration of all factors affecting the financial situation of both parties.


The first step is to identify and evaluate all the assets and liabilities held by the couple, separately or jointly. This includes any liquid and immovable assets, interests to be paid or received through loans taken or given, incomes of both parties, any amount earned or maintained during the marriage, superannuation and so on.


The next step is to decide if a property settlement is needed at all. As we discussed before, the duration of the relationship and the separation as well as the nature of the finances help by the two parties play a major role in helping the court decide if a financial rearrangement is at all necessary.


The third step is to evaluate the contributions made by each party to the marital asset pool. This will include both financial and non-financial contributions made towards the household during the marriage. Whether the personal injury settlement will be included in the asset pool for settlement will also be decided in this step.


Next, the future financial needs of both parties are assessed. Their future earning capacity and sources of income, the share of responsibility of children and other dependents as well as the health and age of the ex-spouses are taken into consideration. Since a personal injury is involved, the impact of that on the earning capacity and medical requirements of the affected person is also assessed.


Finally, the court will evaluate whether the division of assets thus proposed is just and equitable to both parties. This will be done based on the information gathered in the steps before.


The part of the Family Law Act that deals with personal injury division in relation to property settlements is section 4(1). The rules are applied in the second and third steps.



Speak To An Expert For Property Settlement

When trying to protect your personal injury compensation from being divided, your best option is to get expert legal help to assist you in navigating the lanes and bylanes of the laws pertaining to this situation and avoid any breaches. Maatouks Law Group has years of experience in family law and mediation and will show you the right way to approach the situation without any roadblocks.


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Call or message us today to get legal help for property settlements in a divorce and personal injury compensation considerations.