Divorce myths busted: Splitting assets and liabilities
LAST month we started our new series aimed at providing practical legal information and pointers for individuals who are facing the difficult situation of separation, divorce and property settlement. This month we continue with the second instalment considering another myth that we often hear when assisting individuals with these complex matters.
Myth number 2: Each person takes out the same assets and liabilities as they brought into the relationship:
Another myth that we often hear when we first meet with a client is that each person should be placed in the same financial position at the end of the relationship as they were at the start and should therefore take out the same assets and liabilities that they brought into the relationship.
This myth is attractive because of its simplicity, however, separation, divorce and property settlement is rarely this simple.
Over the course of a relationship, particularly long relationships, the initial assets that were brought into the relationship may be sold for a profit or loss, with the sale proceeds applied to purchase new assets. Additionally, original debts and loans may have been paid out or paid down or alternatively increased and new debts and loans may have been incurred.
In fact, there are many things that can occur during a relationship that may result in a change in the makeup of the original assets and liabilities.
While there is no rule that each person takes out the same assets and liabilities as they brought into the relationship, there is a recognised legal principle that considers the contributions that each party has made to the assets and liabilities and the relationship generally.
These contributions include initial contributions, contributions during the relationship and contributions following separation.
The contributions may take the form of financial contributions but they can also take the form of non-financial contributions which include contributions in the role of homemaker and parent.
In the event of separation, it is useful to have evidence of any contributions that you have made to the assets and liabilities of the relationship and the relationship generally.
The evidence required will depend on the type of contribution.
For example, in a situation where an individual has received an inheritance from a family member and used this inheritance to pay down the mortgage over the family home the evidence to support this contribution would be a copy of the will showing details of the inheritance and a copy of the bank statement showing the deposit of the funds from the inheritance into the mortgage account.