How do my new partner’s finances impact on my property settlement?
While it may be an exciting development for you, commencing a new relationship can trigger more emotions and suspicions for your ex-partner when you are in the midst of trying to resolve a property settlement. The relevance (if any) of your new partner’s finances will depend on the circumstances of the new relationship.
The usual approach to property settlement
In determining a property settlement, the Court would typically follow this four-step process:
- Identify and value the assets and liabilities of the parties;
- Consider the contributions made by each party and decide what percentage each party should receive based on those contributions;
- Consider the future needs of each party and whether an adjustment should be made to the percentage division; and
- Determine whether the proposed orders are just and equitable.
Should my new partner’s assets be included?
In the first step, the asset pool to be divided between you and your ex-partner should be identified and valued on the basis of what each of you currently own, whether this is in your sole names, joint names or jointly with someone else. Therefore:
- Assets or liabilities that are solely in the name of your new partner would generally not be included. For example, if your new partner already owned a house when you met, then this would not be included.
- If you have acquired new property or debts jointly with your new partner, then your share of those items would typically be included. For example, if you have purchased a house in joint names with your new partner, then the value of your 50% share would be included.
However, don’t get any ideas about trying to isolate assets by purchasing them in the name of your new partner or gifting them away! It could still be argued that you effectively own those assets or have wasted them.
The inclusion of an asset jointly owned with your new partner in the pool does not mean that your ex-partner will receive this asset. It is merely the value of your interest in the asset that will be taken into account in the overall property settlement. It is unlikely the Court would make an order affecting your new partner’s interest in the asset, as they are a third party to the dispute. The Court could only do this if:
- It is reasonably necessary to effect a division between you and your ex-partner; and
- Your new partner is given procedural fairness, including the opportunity to become a party to the proceedings.
In the third step, the Court is obliged to consider various factors relating to the future needs of the parties, including:
- The income, property and financial resources of each party;
- If either party is cohabiting with another person, the financial circumstances relating to the cohabitation; and
- The responsibilities of either party to support any other person.
If you are living with your new partner, the Court is obliged to consider the financial circumstances of your household. For example, if your new partner is wealthy and paying all of your expenses, it could be argued that you have lower financial needs. However, if your new partner is of modest means and you are equally contributing to the household expenses, this factor alone may not warrant any adjustment.
If you are not living with your new partner, then their financial circumstances may not be relevant. For example:
- In Jarman & Jarman (2006) FLC 93-289, the wife had been in a relationship for years but there was no evidence to suggest it was “anything other than a boyfriend/girlfriend relationship”. The Court accepted that because they were not cohabiting, it was not necessary to take the new partner’s financial circumstances into account or for the wife to bring evidence about his income, assets and work capacity.
- In Zaruba & Zaruba (2017) FLC 93-776, the Court accepted there was no need to consider the husband’s new partner’s finances because they were not cohabiting and “he only stayed regularly at her residence”.
However, regardless of whether or not you live together, if you are receiving regular financial benefits from your new partner, this could be relevant to your future needs by falling within your income or financial resources.
If you need to financially support your new partner or their children, the Court could also consider making an adjustment in your favour. In Radcliff & Radcliff  FamCA 165, the judge found that the Court should be able to have regard to “the demands on a party as a result of their voluntary assumption of responsibility to support members of their new blended family as they move on with their lives”.
Disclosure and evidence
A duty of disclosure applies in property settlement matters, which requires each party to disclose any relevant documents or information in their possession or control to the other party.
Your ex-partner may seek disclosure of your new partner’s financial documents or information. However, you may be able to argue against this on the basis that:
- The documents are not relevant to an issue in the proceedings; or
- The documents are not in your possession or control.
If there continues to be a dispute about whether disclosure is required, this may ultimately have to be determined by the Court.
If property settlement proceedings are on foot, each party will have to file a document called a Financial Statement. The form specifically requires the following information, which could relate to a new partner:
- If another person is living with you, their name, age, relationship to you and income;
- The details of any expenses that another person pays for your benefit; and
- The details of any expenses that you pay for the benefit of another person.
During proceedings, it is also possible for your ex-partner to issue a subpoena directly to your new partner or to their financial institutions. If no objection is made, the recipient of the subpoena will then have to produce documents to the Court which the parties will be able to view.
In Pates & Pates  FamCAFC 171, the Court said that aside from the information required to complete the Financial Statement, “there is no general obligation upon parties to disclose the financial circumstances of their domestic partners”. However, the husband had put his new wife’s finances in issue by claiming that an adjustment should be made in his favour because he needed to maintain her and their two children. The Court rejected this submission because he failed to call his wife to give evidence about her finances.
You should be aware that there is a way to protect your financial interests in your new relationship as well. You and your new partner could enter into a Binding Financial Agreement setting out how your assets and liabilities would be divided in the event you separate in future. However, there are various formal requirements for such an agreement to be binding, so you should speak to a lawyer about this.
If you would like advice about your particular situation, please do not hesitate to contact us at Lynn & Brown Lawyers.
About the Author: Kate was admitted to the Supreme Court of Western Australia in 2012 and has practised family law for many years. She is motivated to help clients achieve positive outcomes as efficiently and amicably as possible but also has experience in court proceedings.