For some of our clients, the question comes up whether an asset that is in only one person’s name is still considered part of the property pool in a separation or divorce.
The ownership of an asset, such as a business or a house, can have implications for:
- tax (for example capital gains tax or stamp duty)
- liability (for example a car and the associated car loan)
- income-earning capacity (like in the case of a business)
Couples often make decisions to keep certain assets in one person’s sole name for one of those financial reasons.
It may also be that ownership of the asset pre-dates the relationship. For example, if each partner already owned a car before they met.
Even in simple cases, it’s common for people to have bank accounts and credit cards in their sole names. Superannuation is another asset that is held only in one person’s name.
So you can see it’s not uncommon for assets to be in one person’s name, even if they are considered by a couple to be “our business”, “our cars”, or “our house”. The question naturally arises, do those individual assets (and liabilities, in the case of a credit card or loan), form part of the joint property pool?
The short answer is, yes, they generally do.
When a married or de-facto couple separates, the property pool is the total value of all the assets. Each party must fully disclose their finances to the other party. That includes assets and liabilities that are in their sole name. It also includes assets that have previously been kept secret.
Failing to do so may leave open the possibility of future claims against the person’s property, previous agreements being set aside by a Court or, in the case of matters that are in Court, a charge of contempt of Court.
However, just because an asset in one person’s name is considered part of the property pool, does not mean that person is now at risk of losing ownership. Nor does it mean that the asset needs to get divided 50/50.
In the example given earlier of each partner already owning a car before they met, each person may retain ownership of their car in the resulting property settlement. Similarly, the person who has sole ownership of a house may keep the house, and in return agree that their former partner receives a larger share of other assets in the pool.
In other cases, an asset that is solely owned may need to get divided up to reach a settlement. For example, an investment property in one person’s name might get sold so that the proceeds of the sale can then get divided up between the parties.
Other factors also get considered during the property settlement negotiations. The initial contributions of each party get taken into account along with the ongoing contributions during the relationship, both financial and non-financial (e.g. primary carer of children). The future needs of each party also get considered when determining a property split.
The goal is to achieve an equitable property settlement. That goal can’t get achieved if all the property isn’t full disclosed and taken into consideration at the beginning of negotiations.