Divorce is not just an emotional process but also a legal and financial one, where both parties must navigate complex legal arrangements to ensure fair outcomes from the separation. As part of this process, two of the most common yet also most contentious financial issues that tend to arise are property settlement and spousal maintenance.
While both these aspects of family law aim to address financial security of the involved parties, they operate in fundamentally different ways and are each designed to serve specific purposes. Understanding the key differences between them can help you make informed decisions during a divorce.
What is Property Settlement?
In Melbourne, a divorce property settlement refers to the division of all types of assets – real estate, savings, investments, superannuation, and even debts accumulated by the couple during the marriage. This process aims to divide the couple’s property in a way that is just and equitable, taking into account various factors such as:
- The financial contributions of each spouse.
- Non-financial contributions, such as homemaking and child-rearing.
- The future needs of both parties, including earning capacity and care responsibilities.
For example, after 20 years of marriage, Emily and Mark decide to divorce. During their marriage, they accumulated a family home, investment properties, and a shared bank account. According to family law, their property settlement will see these assets be divided between them based on their respective financial and non-financial contributions to the marriage.
It is important to understand that the division is not necessarily equal. Instead, it is “just and equitable,” which means that the court will assess the couple’s entire financial and personal situation to reach a fair outcome.
What is Spousal Maintenance?
Spousal maintenance, often referred to as alimony, is the ongoing financial support one spouse provides to the other after a divorce or separation. This type of payment is based on the idea that one spouse may need financial assistance to maintain a reasonable standard of living due to factors such as:
- Earning capacity
- Age or health
- Time taken out of the workforce to care for children or support the other spouse’s career.
For example, Sarah and John have been married for 15 years. During their marriage, Sarah stayed home to care for their children while John worked. Following their divorce, Sarah may struggle to re-enter the workforce or find a job with a sufficient income to maintain her lifestyle. In this case, John may be required to pay Sarah spousal maintenance to support her during this transition.
Spousal maintenance is designed to help bridge the gap and provide financial relief, either for a set period or indefinitely, depending on the circumstances. It is important to note that spousal maintenance is separate from child support, which is specifically designed to cover the costs of raising children.
Key Differences Between Property Settlement and Spousal Maintenance
Under family law, property settlement and spousal maintenance both focus on post-divorce financial arrangements. However, they are designed to fulfill different purposes and have unique legal characteristics.
- Purpose
- The purpose of property settlement is to divide the couple’s assets fairly, considering both financial and non-financial contributions.
- The purpose of spousal maintenance is to support the lower-earning or non-earning spouse until they can become financially independent.
- Nature of Payment
- Property settlement is a one-time division of the couple’s assets and liabilities.
- Spousal maintenance is an ongoing financial obligation. It may be paid weekly, monthly, or as a lump sum.
- Duration
- Property settlement is final. Once the assets have been divided, the parties are generally not required to continue any further financial ties regarding those assets.
- Spousal maintenance can be temporary or permanent, depending on the circumstances. It is generally a short- to medium-term support.
- Flexibility
- Property settlement, once finalised, cannot be changed unless there was a significant error, fraud, or failure to disclose assets during the settlement process.
- Spousal maintenance arrangements can be reviewed and adjusted in some situations.
Can Property Settlement and Spousal Maintenance Overlap?
In a way, they can. While you can make an independent legal application for spousal maintenance, this application can also be part of your divorce property settlement in Melbourne. Furthermore, how the property is divided can influence the amount of spousal maintenance paid/received.
For instance, if one spouse receives a significant portion of the marital assets in the property settlement, the court may reduce or eliminate their spousal maintenance. Conversely, a smaller property settlement might result in higher spousal maintenance payments to support the financially weaker spouse.
The Role of a Binding Financial Agreement
Negotiations over divorce property settlements and spousal maintenance can at best be a tedious affair, and at worst be a significant source of strife and conflict between both parties.
In situations where couples enter the marriage with significant assets or where future financial security is a concern, it may be worth considering a binding financial agreement (BFA, or also known as a prenuptial agreement) to provide peace of mind and avoid a prolonged conflict if the worst should happen.
While no one enters a marriage expecting their union to break down, BFAs ensure that safeguards are in place for both parties if such comes to pass. A good prenup agreement lawyer can be a knowledgeable yet objective third party by clearly outlining expectations and asset division in the event of a divorce, as well as providing recommendations to make the BFA more equitable.
Secure Your Financial Future with Nevett Ford
Understanding the differences between spousal maintenance and property settlement is crucial for navigating the financial aspects of divorce. Early legal advice can help protect your rights and ensure both are managed effectively for your financial future. This is where working with a lawyer experienced in divorce and other areas of family law becomes essential.
At Nevett Ford, our family law lawyers are experienced and dedicated to securing a fair outcome that safeguards your financial future. Whether you are dealing with spousal maintenance or a divorce property settlement in Melbourne, they can provide crucial guidance and ensure all financial aspects are thoroughly addressed while advocating for your best interests. Contact us today to see how we can help.