How is property settlement decided?

When a long-term relationship breaks down the former partners usually need to determine how their assets are going to be divided between them. If the two parties cannot agree on a fair division of assets and it cannot be mediated by lawyers then the issue is presented to the courts for a judge to arbitrate.

Contrary to the way the division of assets is portrayed in film and television, the outcome is rarely a clear 50-50 split. Beliefs that women tend to end up with a higher percentage of assets than their male counterparts are also inaccurate, being based on a misunderstanding of the system.

Let’s take a look at the truth of how property settlement is decided.

Valuation of assets

The first step in property settlement is the determination of what is going to be divided. This includes the total value of financial resources, assets and liabilities that were under the control of the relationship.

Financial and non-financial contributions

When arbitrating a property settlement the court will consider a mixture of financial and non-financial contributions from either party. These considerations can be difficult as different people have contrary ideas on what value is placed on non-financial contributions.

While a financial contribution might be the monthly income one party provides, a non-financial contribution might be the housework and childcare that another party provides.

Future needs

After the contributions of each party are established, the court then takes into consideration the future needs of each. The future needs of each party is determined based on factors such as age, health, financial resources, employability and the responsibility of child care.

For example, if a mother had ended her professional career after marriage in order to raise children then her earning ability post-marriage will be lesser than her male counterpart. This is the primary factor behind why women traditionally get a larger portion of marital assets.

When dividing the assets of a relationship post-breakdown the court is considering the value of the relationship and how that value should be fairly broken up between parties.

Child custody also plays a role in the division of assets. If one party is decided to be the primary caretaker of children then they will be entitled to a larger sum of the assets because the cost of raising children is taken into consideration.

Summary

While some may believe that one party getting more than 50% of assets is unfair it should be noted that the earning capacity of the other party may be the more valuable takeaway. While predicting the future needs of separating parties and distributing assets accordingly can never be totally accurate, the family law system does its best to create an outcome that is justified as fairly as possible.