Lump sum contributions in property settlements

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:

1. Assessing the contributions (financial and non financial) made by each party; and
2. 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.

The case of Williams made another important point. The court said:

“We think that there is force in the proposition that a reference to the value of an item as at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution towards the parties. Thus where the pool of assets available for distribution between the parties consists of say an investment portfolio….that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing or the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in so doing it equally as important to give recognition to the myriad of other contributions that each of the parties has made during the course of their relationship”.

When assets come into existence during the relationship these considerations also come into play. One further issue is does the time that the asset comes into existence make any difference in the division of assets?

In the case of Aleksovski the court said:

“Additionally, late in the marriage, the wife received a large capital sum arising out of a motor car accident. In my view whether the capital sum was acquired early in the marriage, in the midst of the marriage, or late in the marriage, the same principles apply to it. The Judge must weigh up various areas of contributions. In a short marriage, significant weight might be given to a large capital contribution. In a long marriage, other factors often assume great significance and ought not be left almost unseen by eyes dazzled by the magnitude of recently acquired capital…What is important is to somehow give a reasonable value to all of the elements that go to making up the entirety of the marriage relationship. Just as early capital contribution is diminished by subsequent events during the marriage, late capital contribution which leads to an accelerated improvement in the value of the assets of the parties may also be given something less than directly proportionate weight because of those other elements”.

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. You should ensure that you get advice from a lawyer who has expert family law knowledge.