Being impartial on partial property settlements
Commencing Family Court proceedings can be daunting – not only because it’s an emotional time in your life, but because of the high legal fees that can result from what can be a long and drawn out process.
You might wonder, how will I be able to pay for a car, or replacement furniture? How will I pay my pressing debts? Or my legal fees?
In some circumstances, the Court will permit you (and/or your spouse) to receive advances of funds along the way. These advances are to pay for things which you might need in the short term or to pay a pressing liability or for your legal fees. They come out of the marital pool of assets, and are known as ‘partial property settlements.’
The word ‘partial’ refers to the fact that these advances are not full and final property settlements. That will come at the end of the family law process (either at a final hearing, or a final settlement agreed between you and your spouse). Rather, they are interim distributions to fund your expenses whilst you are waiting for your final property settlement.
Of course, partial property settlements are not necessarily free money. Any advances along the way may be deducted from your entitlement at the end of the process.
A partial property settlement is not appropriate in all circumstances. The most important factor is whether there will be enough property remaining after the interim distribution to meet the entitlements and reasonable expectations of both parties at the final hearing (or settlement). Essentially, the court will only grant you a partial property settlement if you are likely to receive that amount or more at the end of the process. Therefore, there is no harm in bringing the payment forward in time.
Sometimes the Court will not be able to say with confidence whether there will be enough left in the pot at the end of the process. This may be the case if there is doubt about whether a party will be entitled to anything at all, or where there is doubt about the true value of the assets to be distributed.
In these situations, it may still possible for one party to obtain an order which enables him/her to continue funding the litigation. There should be a level playing field between two parties to the litigation. If one party can fund the litigation but the other can’t, the court may make a ‘dollar for dollar’ order. That means that for every dollar the wealthier party spends on legal fees, he/she must pay the other party an equivalent sum which is to be applied to their legal costs. This enables the litigation to continue on an equal footing.
Again, the less wealthy party will not be receiving free money. Rather, the court will likely defer the characterisation of that money to the final hearing (or settlement). It may be characterised in any of the following ways:
as a debt due from the less wealthy party to the wealthy party; or
as part of the less wealthy party’s entitlement in a property settlement; or
as a maintenance payment for the less wealthy party; or
as a factor taken into account, but for which no adjustment is considered necessary.
The family law system moves slowly. It can take up to 3 years for a case to wind itself through the Court to a final judgment. Many expensive hurdles have to be managed along the way. A partial property settlement can provide parties with practical solutions to cash shortages. These solutions allow parties to access money now, but for those funds to be accounted for or characterised by the Judge at a later date.