Family Law: 24 April 2020
COVID-19 is having a significant and drastic impact on our economy. Such economic impacts may directly affect and implicate your family law property settlement. If you are in the midst of negotiating a property settlement with your former partner based on information obtained prior to COVID-19, you may find that the asset pool available for division has now changed somewhat.
Some of the impacts that may arise from COVID-19 in relation to a family law property settlement include the following:
Given the uncertainty and volatility of the share market in light of COVID-19, you may find that the value of your superannuation has been negatively impacted. Such changes in the market is also making it difficult to assess future movements. In Family Law matters, superannuation splitting orders are usually expressed in dollar terms, otherwise known as a base amount. However, given the COVID-19 impacts, any superannuation splitting orders should now consider expressing splitting orders as a percentage rather than using a base amount to take into account economic uncertainty.
Often in Family Law property proceedings, businesses need to be valued. Businesses that have been valued based on 2019 financial year information may no longer be accurate and will reflect the effects of temporary business closures, employee absences, and/or reduced supply and demand issues. Correspondingly, valuations may not reflect businesses that are booming and experiencing a rapid increase in demand (think of toilet roll manufacturers and gym equipment providers). As such it is important to consider the nature of the business and whether any prior valuations may overstate or understate the current value of a business.
Likewise, the property market is experiencing its own set of challenges due to COVID-19. The value of real estate may be affected by changes in the current economic climate, both domestically and internationally. Further, the current Government restrictions prohibiting public open for inspections may result in delays selling properties.
We recommend obtaining updated valuations/appraisals to factor in the current, and what will most likely be ongoing economic impacts. Further, as with superannuation splitting orders, it may be appropriate to negotiate a property settlement based on an overall percentage division rather than a fixed sum which each party is to retain from the sale. This will assist in combating uncertainties in the property market.
If you need assistance with your family law property settlement, please get in contact with a member of our experienced Family Law team.