Is it fair and equitable to both parties to divide their assets and remain married?

Usually, couples divide their property between themselves once their relationship has broken down. But in some circumstances, the Family Court can step in and divide a couple’s property even though they’re still married.

In recent years, the law regarding property division has changed.

Previously, once a couple separated, the Court would consider a property settlement in four steps:

  1. What is the value of the property pool?
  2. Who has made what contributions? Non-financial contributions such as who does the household chores or looks after the children, are considered;
  3. Allow for future needs such as for ill health or looking after the children; and
  4. Will the ordered result be fair (“fair and equitable”)?

The recent case of Mr and Mrs Stanford has changed how and when the Court will consider a property settlement*.

Mr and Mrs Stanford were an elderly couple who married in 1971. They each had adult children from previous relationships, but no children together. In her elder years, Mrs Stanford moved into high level care due to a stroke. Mr Stanford continued to live in their home which had been in his name for 40 years. Mr Stanford had put $40,000 into a bank account for Mrs Stanford’s medical needs. The Stanfords were still married, despite being physically separated.

Mr Stanford left his house to his children in his will. Under the will, Mrs Stanford was able to live in the house until she died. As she was now in care, and unlikely to get well enough to return home, the house would go directly to Mr Stanford’s children when he died and Mrs Stanford would likely receive nothing of the house that she had lived in for almost 40 years and contributed to.

Mrs Stanford’s children were not able to make a claim on the house. Her daughters sought a family law property division on behalf of their mother. The Family Court ordered 42.5% of the property go to Mrs Stanford. This meant Mr Stanford would have to sell the house to pay Mrs Stanford, and would have to move out, even though he was elderly and wanted to continue to live in his home.

Mr Stanford’s children appealed this decision to the Full Court on his behalf, as it was unfair on Mr Stanford, arguing that the $40,000 in the bank account set aside for her meant that Mrs Stanford was taken care of. Unfortunately, Mrs Stanford then died during the appeal. The Court then ordered that it was still ‘fair and equitable’ for 42.5% of the property to go to Mrs Stanford, but ordered that it would be paid to Mrs Stanford’s estate once Mr Stanford had died, allowing Mr Stanford to continue to live in his house.

Mrs Stanford’s daughters appealed this decision and took the matter to the High Court of Australia. The High Court found that Mrs Stanford had been adequately provided for, and Mrs Stanford’s daughters’ claim failed. It also ruled that the Family Court had the power to make orders for property adjustment even when the parties were still married. This is provided it is ‘fair and equitable’ to do so. In Mr and Mrs Stanford’s case, it was fair and equitable that the Court ordered a property settlement, even though the Stanfords were still married, so that Mrs Stanford’s interests were protected.

The overriding principle in a property settlement is therefore always whether the outcome will be ‘fair and equitable’.

Now, to determine a ‘fair and equitable’ property settlement, the Court asks:

  1. Is it fair to make property settlement orders in the first place?
  2. What is the value of the property pool?
  3. Who has made what contributions? and
  4. How will future needs be provided for?

Given the challenges of modern family structures, it is important to know that the Court can step in to make suitable property orders now, to avoid heartache and expensive litigation later on.

If you have any enquiries relating to a deceased estate, please contact Tim Mitchell, Solicitor Director of Bay Legal, by telephone (02) 9344 0682 or by email to tim.mitchell@baylegal.com.au ; or Thao Phan, Associate, by telephone (02) 9344 0682 or by email to thao.phan@baylegal.com.au .

* Stanford v Stanford [2012] HCA 52

Disclaimer: The information in this article is not intended to be a complete statement of the law relating to the issues raised. Accordingly, no person should rely on this information without first obtaining specific advice from a legal practitioner in the office of Bay Legal.