This is the second part of our series on “How does the Family Court resolve a property settlement?” We recommend reading Part I: Four Step Process first.
What is a “future needs” adjustment?
The essential third step of the Four Step process is to consider the future needs of the parties, taking into account their respective financial commitments and resources. The purpose of an adjustment for future needs has been explored extensively in case law In the High Court case of Mallet v Mallet , Justice Wilson articulated:
The objective of the section is not to equalise the financial strengths of the parties. It is to empower the court, following a dissolution of a marriage, to effect a redistribution of the property of the parties if it be just and equitable to do so.
What does this mean practically?
A common example we see is when one party (X) devotes their time and efforts to raising the children and caring for the household. The other (Y) invests their time and efforts in furthering their career so that they can provide for their family.
Both parties have an opportunity cost here. X may sacrifice their career advancement and financial independence. Y may forego their role as the children’s primary carer.
Unintended consequences may occur if the Court stops at the various contributions that the parties made throughout the relationship. There may be a great injustice to X, who could be left in a financially weaker position. Therefore, a future needs adjustment allows the Court to redistribute the property so that X is appropriately provided for, given that Y is likely to be financially ahead of them in the years to come.
What else does the Court consider when assessing future needs?
The family law legislation sets out a number of factors for the Court to consider when assessing future needs.
- Section 75(2) of the Family Law Act 1975 (Cth) contains the factors for married couples.
- Section 205ZD(3) of the Family Court At 1997 (WA) sets out the equivalent factors for de facto couples.
The factors the court may consider when assessing future needs include, but are not limited to:
- The age and health of each party;
- The income, property and financial resources of each party;
- The income earning capacity of each party;
- Whether either party has care of children under 18 years old;
- Whether either party has responsibilities to support any other person;
- Eligibility for a government or superannuation pension, allowance or benefit;
- The standard of living that is reasonable in the circumstances;
- Whether an adjustment would increase the income earning capacity of a part by enabling them to undertake further education or training;
- The effect of a proposed adjustment on the ability of a creditor to recover a debt;
- If either party is now living with another person, the financial circumstances of that cohabitation;
- Whether child support is being paid by either party to the other;
- The terms of any binding financial agreement; and
- The terms of any proposed or existing property orders.
Is a “future needs” adjustment a sure thing?
While the legislation sets out these future needs factors, you don’t actually have to prove a “need” for the adjustment. The Court has a discretionary power to make an adjustment in favour of the financially weaker party.
The key word is “discretionary”. Simply put, the Court does not have to make an adjustment. But it may make an adjustment in circumstances where the resulting orders would be just and equitable.