When a couple are divorcing a number of aspects of their relationship and family life need to be resolved. The couple need to reach agreement regarding the parenting of any children impacted and they need to examine their financial state and come to an agreement about how their assets and liabilities should be split.
How Financial Mediation Works in Australia
Mediation for financial settlement is an important part of the divorce process. The Family Court expects a couple who are divorcing to attempt to mediate their issues so as to avoid a court hearing.
A split couple engages the services of a family mediator (more formally, a family dispute resolution practitioner) and makes a genuine effort to resolve any issues they have arising from the divorce.
Where Does Financial Mediation Fit in Family Law?
All aspects of family law in Australia are framed by the Family Law Act (1975.) This act was a watershed piece of legislation and has a direct impact on family mediation, the Family Court, family law, and the work of lawyers in the field.
This act places children at the centre and recognises that any and all decisions regarding children are made in their best interests.
With this in mind the Family Court expects couples to attempt mediation. This mediation provides an opportunity for the couple divorcing to collaborate and work out a financial agreement, that prioritises the best interests of the children, rather than engaging in an adversarial process such as lawyer led negotiation or a Family Court Hearing.
What is the Financial Mediation Process and What Does it Consider?
Financial agreements mediation follows a relatively standard format. The individual parties meet with a family mediator (family dispute resolution practitioner) to discuss their circumstances and situation. Once the family mediator has decided the mediation will proceed both parties meet with the mediator for a financial mediation session.
The first step during the mediation process is for both parties to disclose all their financial information. This can be far reaching and include such items as household assets, cash, mortgage statements, student loan debt, business holdings, term deposits, superannuation, crypto currency, offshore assets, and shares.
Full disclosure is hugely important as the family mediator now pools assets and liabilities from the information that’s been disclosed. A significant aspect of this part of the process is determining the value of assets. Having an independent valuation or point of reference for value helps to move this forward positively. A failure to disclose can lead to serious and significant legal repercussions.
The next step is an interesting one. The mediator asks both parties to outline their contributions to the relationship, both financial and non-financial. This helps to provide a context to the relationship and the financial state the splitting couple are in. Things like time away from work to raise children or undertake study for improved career options come into the conversation. Health issues, caring for elderly relatives, periods unemployed and unable to find work, what assets and liabilities each party entered the relationship with. It is a rich tapestry especially when framed around the best interests of the children and how these were addressed.
The next step is crucial and deserves significant focus when undertaking financial settlement mediation. Future needs.
Future care needs of the children, earning capacity, schooling costs, housing costs and ongoing expenses, health needs and expenses, travel expenses, weekly bills, the cost of hobbies, holidays, tertiary study expenses. A seemingly endless list that a divorcing couple needs to seriously consider when negotiating a financial agreement mediation.
So, disclosure has happened, the pool has been decided upon, the contributions to the relationship have been noted, and potential future costs have been identified. Great!
From this point the split couple, utilising their family mediators skill set, negotiate exactly how current assets and liabilities are divided with a view to meeting current and future needs.
This step can take some time and more than one financial mediation session may well be needed.
Through the ebb and flow of sharing ideas, proposing solutions and scenarios, negotiation, and reality testing the couple will usually conclude financial mediation with an agreement. Importantly, some aspects may not be agreed upon and that is just fine. What’s important is that anything where agreement is reached is documented so that the list of issues diminishes over time.
Clients have an option at this point. They can go and fulfill the needs of the agreement or they can provide the agreement to their respective lawyers who then approach the court to have a Consent Order or Binding Financial Agreement created. These pathways can be further discussed with your family lawyer. At Resolutions Australia it is our view that if the demands of a financial mediation agreement are being met then there is no need to approach the court for a legally binding order.
What Financial Issues Can Be Resolved Through Mediation?
It is important to recognise that all manner of financial matters can be resolved during a financial agreement mediation. At Resolutions Australia we’re able to support split couples through navigating complex business, farming, offshore, and culturally bound financial circumstances. In noting this there are limitations that family mediators are always on the lookout for. These can include pre-existing business agreements regarding who can own, sell, or buy a stake in a business and the approval of other shareholders, restraint of trade agreements, current ownership structures of family based businesses, active or silent roles in businesses, governance versus management limitations, the ability to service debt and the flow on impact on other shareholders, terms and conditions of family trusts… another potentially endless list! Thankfully a professional family dispute resolution practitioner is trained to support clients through the intricacies of the process.
Property and Asset Division
This area of dispute is the most common. In essence, the family home, the belongings in the home, and any other day to day type family assets. This could include holiday homes and rental properties, the contents of storage lockers or furniture stored with a friend or relative.
Debt Allocation
This area examines the splitting of couples debt at the time of the financial mediation. What is owed, why it’s owed, to whose benefit was the debt entered into, was there agreement around this, if it was for an asset who expects to retain the asset or will it be sold? Much to ponder but with full disclosure and open discussion resolution is easily done.
Financial Support & Income
This area of dispute has a future focus to it when undertaking financial mediation. The splitting couple will examine care responsibilities for the impacted children and the income (and potential income) of the parent parties. This area can be navigated simply using current needs then deciding on how increases can be made based on increasing needs, inflation, and how to deal with extraordinary expenses. By developing a base formula the couple can avoid re-mediating in the future. A very positive step.
Complex Financial Situations
So, you own a business alongside extended family members, on family owned land. It’s carrying both business and mortgage debt, has several family member employees, is planning a major expansion, and a larger company has shown an interest in buying the company outright and bringing in their own staff. And you’re going through a divorce. Complex financial situations don’t need to have complex solutions. By spending time reaching agreement on a value and perhaps taking advice from a business valuer the amount agreed can be added to the asset pool. From here it’s a matter of recognising the easiest way to facilitate how the value will be distributed amongst the parties. This doesn’t have to mean protracted legal negotiation with agreements and signatures in all directions. It could be as simple as taking the value as an extra percentage of other assets or receiving a cash payment. The alternative is a lengthy legal dispute over a complex financial matter. A certain pathway to quickly ensuring there’s little left to argue over!
Financial Settlement After Separation
This is the encompassing of all of the above. A family mediator can support you through the totality of the financial split and help you develop an agreement. Your issues in dispute don’t have to be compartmentalised. They can be, and usually are, addressed all at once with agreement reached on what’s in the asset and liabilities pools and how they’ll be split. When viewed as two lists with totals on a spreadsheet it is remarkable how many couples view the figures and reach agreement on what percentage each will have with a view to the best interests of the children.
Benefits of Financial Mediation
The benefits of financial mediation are numerous and profound.
Of greatest significance to most clients Resolutions Australia engages with is cost. A standard mediation costs as little as $800 per client. Compare that to the cost of negotiating with your ex back and forth between lawyers. Perhaps a court hearing when the legal negotiations are unsuccessful? Clients will be looking at costs measured in the tens and hundreds of thousands.
A further benefit is that financial disputes are handled at the lowest possible level and in a timely way. Legal negotiations can go on for months where each point is argued back and forth via letter and email. Where even the most minute of concerns is inflated to a point of contention demanding protracted negotiation. You decide to instruct your lawyer to seek a court hearing. A first mention will see you waiting several months. From here you’ll then be held over for a full hearing at some point many months in the future. The other party may seek an extension of time. In fact they may do this over and over as a delaying tactic to seek a more beneficial resolution. And what of the value of the assets and liabilities in the meantime? Will change in value mean an altered approach to court? And how much will a changed approach cost in legal fees? And then the hearing, and the appeals, and the re-litigation of some or all of the points raised in the orders. It may take years.
Thirdly, and arguably most important, the emotional and personal toll on clients. By mediating early clients can get on with life. Their new normal takes shape, the agreement is in place, and life carries on. Communication between exes is usually civilised and a more positive relationship is established. This is due to the fact that agreements reached have been done collaboratively and positively and both parties have a vested interest in ensuring the plan runs smoothly.
By negotiating through lawyers and/or heading to court clients enter into a sometimes surreal holding pattern where any updates are seen as points of conflict, and the entire process is inherently adversarial. Winners and losers and ongoing battles to be fought. All this over months and years and a significantly increased likelihood for an irreparable relationship between the two parties at ‘war.’ An awfully damaging way to be for all concerned.
Choosing the Right Financial Mediation Service
When considering a financial mediation service it is important to take the time to fully research your options, understand your own needs, and recognise the impact on your children of the solution you choose.
At Resolutions Australia we recognise the uniqueness of each client and their situation. As a deliberately small business we maintain the flexibility and resilience to work for the needs of the clients as opposed to utilising a formulaic process. Your needs, your way, our professional skill set. Timely, affordable, flexible, and child focused. With close to 30 years experience supporting families in vulnerable situations we know how to help you through the tough times.
If you need family mediation support, want to share your story, get some mediation advice, or just have a question, we urge you to get in touch. We’d love to hear from you!
