Lump sum contributions in property settlements

May 7th, 2012

by the Alan Wright

It is often the case that in a marriage (or in a defacto relationship) one person makes a significant financial contribution by bringing substantial assets into the relationship or receiving assets during the relationship (eg an inheritance).

If the parties separate what effect does this financial contribution have on the division of the property?

The first thing to say is that an asset owned at the commencement of the relationship or inherited during a relationship is not exempt from being divided in the property settlement.

In working out the appropriate division of assets the main focus is on two things: assessing the contributions (financial and non financial) made by each party and assessing the future needs of each party.

An asset brought into the relationship is a financial contribution by the party who owns the asset. Such contributions are generally referred to as “initial contributions”. What has the Family Court said about “initial contributions”?

The first thing it has said is that there is no formula which prescribes how a court should deal with initial contributions.

The second thing it has said is that initial contributions cannot be considered in isolation from all the other contributions made during the relationship. In the case of Pierce the court said that it is “a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife”. One factor in the ‘weighing’ process will be length of the relationship. In most cases it would be reasonable to assume that an initial contribution would have a greater effect on the division of assets in a relationship of short duration than it would in a relationship of long duration.

Clearly a lump sum financial contribution will be an important consideration when assessing the contributions made by each party. The precise effect will depend on the facts of each case.