Contributions in family law: When working out a property settlement, one of things considered is each party’s contributions to the matrimonial asset pool. Involving the assessment of a complex “myriad of contributions”, this assessment requires the judge to determine the weight to be placed on each party’s contributions, in percentage terms. It can be a contentious decision with litigating parties wanting to show that their contributions should be valued as greater. It can be a tricky decision for the courts because of the difficulty of weighing up contributions that are not always measurable in financial terms. Let’s have a look at the different kinds of contributions that exist.
This refers to any direct financial contributions by parties, for example: who purchased a property, who contributed to a mortgage, who paid for property maintenance, rates and taxes, who received an inheritance or gifts from family and any other indirect financial contributions to property during the marriage.
These relate to contributions of time and effort that parties may undertake in maintaining a property. So, who carried out upkeep of property (mowing, maintenance etc), who managed the property, if a party spent time to maintain the property, unpaid personal labour for renovations etc.
This area relates to the role of a homemaker spouse who handles cooking, cleaning, washing, ironing, childcaring duties, etc. It has long been the case that when it comes to property settlements, courts will treat financial contributions made by a “breadwinner” just as important as the non-financial contributions of a homemaker/parent in a marriage.
In relationships where one person has earned the majority of the income, while another person has been the stay-at-home parent or homemaker (or simply earned less because they are in a lower-paying industry), the Australian courts will usually consider it unfair if the breadwinner were to be given a financial advantage in divorce proceedings, particularly where he or she has only actually been able to go out and work thanks to the non-financial contribution of the homemaker in looking after the home. Both parties contributed to the family unit, although in different ways. Overall, it was a team effort.
However, in some special cases, there is a potentially different view of how these contributions are assessed. In the case of Ritter & Ritter, the court viewed one party’s contribution as being superior to the other party because the main breadwinner was also found to have also done the majority of homemaker and parenting work. Usually though, proving who has performed more domestic duties is often a difficult thing to assess objectively and often relies on one word against the other, with the courts tasked with determining which story is the more credible. However, if one party is to stay at home and look after children, they should not be disadvantaged in terms of what percentage of the property pool they would receive on divorce.
When are homemaker and breadwinner contributions not equal?
The guidelines on contributions aim to avoid discriminating against homemakers who have assisted partners to be able to develop successful careers. But in some cases, a “breadwinner” party might successfully argue their contribution was “special” and significant. But this is an extremely hard feat to accomplish. It’s simply not enough to argue that you were extra-hard working or are particularly talented. There has to be some extraordinary exceptionality involved.
One husband attempted to argue his special skills and entrepreneurial flair in property acquisition and development had led to the wealth that the parties shared. However, the fact that the man’s work took him away from the home to such an extent actually imposed a bigger burden on the homemaker and childcaring wife, which the court found neutralised any special contribution he may have made through his skills.
Note that courts have established that there is no actual law relating to “special contributions” and the concept is a matter for the discretion of the judge as to whether to differentially weight contributions based on the unique circumstances of a matter.
Courts will also assess any impact of a property distribution on future-earning capacity and any need to consider spousal maintenance.
The timing of contributions
Apart from assessing the kind of contribution made, the courts will also look at the timing of when contributions were made and how this affected the parties’ marital wealth. When it comes to contributions, these may fall into the category of initial contributions, contributions during the marriage, post-separation contributions and windfalls (inheritances, lottery wins, etc).
When it comes to property contributed at the start of a relationship, that initial contribution is not permitted to be “quarantined” but rather is assessed holistically in the context of all other contributions. This is because the effect of an initial contribution will likely change over the course of a marriage: capital contribution early on the relationship can be diminished by other events during a marriage. But on the other hand, capital contribution late in the relationship could lead to an acceleration in improvement to assets and as such an increase in their value. Later contributions are usually given more weight than early contributions.
Typically, the longer the marriage, the less an initial contribution from one party will be seen as belonging to that party alone. For example, in a short marriage, significant weight may be given to a large capital contribution, but in a long marriage, other factors might assume greater significance and must be considered.
A note on windfalls
Lottery wins can be a tricky area. In some cases, a lottery win has been deemed a “special contribution” if it was only the winning party who made the contribution leading to the win. However, in recent cases, even if a winning party purchased the ticket (or “contributed financially” to the win), the windfall has been split fairly amongst the spouses, because the costs of small day-to-day purchases such as a lottery ticket should be expected to come out of joint funds, and not be an expense that is somehow micromanaged in the household. As such, both parties to a marriage are said to have “contributed” the funds that bought the winning ticket.
However in cases where a lottery win occurred post-separation, but a spouse wishes to claim they contributed the funds used to purchase the winning ticket as part of their “joint matrimonial economy”, given the inconsequential nature of the sum spent courts have said it’s pure sophistry or opportunism to argue that the ticket was bought with matrimonial funds. One judge said: “The money [to buy the ticket] could just as easily have been found on the pavement”.
But note that in a recent case involving a husband who had won a $5million lottery prize a year and a half after separation, the wife was granted $750,000 of the winnings, a decision upheld on appeal.
In summary, each matter’s unique circumstances will determine how the courts eventually assess the weight of particular contributions, and it’s not always clear what an outcome might be. For this reason, you should seek legal advice relating to contributions and your property settlement.
Please note our blogs are not legal advice. For information on how to obtain the correct legal advice, please call Alliance Family Law