Family Law Property Settlement and Life Expectancy

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Before getting in to the actual nitty gritty of a Property Settlement there is a threshold question that needs to be considered: “Is it just and equitable that there be a property settlement?”. This needs to be answered by identifying the existing legal and equitable interests of the separating parties according to ordinary common law and equitable principles[1].

Once the decision is made to proceed with a property settlement, consideration is next given to whether it ought to be a global division or an asset by asset approach.

The four (4) step process advocated by the Full Court of the Family Court[2] is applied in ascertaining the entitlement of parties. Each step involves:

  1. Identifying as at the date of the settlement, the value of the parties property, liabilities and financial resources;
  2. Identifying the parties contributions to the acquisition conservation and improvement of the property identified; (contribution based entitlement)
  3. Identifying and assessing the parties ongoing and future needs (adjustment for future needs)
  4. Considering the effect of the steps in 1-3 above and what orders would represent a just and equitable division of property in all the circumstances.

Once the property available for distribution is identified in step 1, the contributions of the parties to that property are identified at step 2 and expressed as a percentage – say 50%/50% or 60%/40% or the like.

Once each party’s future needs are identified at the third step, their impact on the entitlement of the party is assessed in percentage terms relative to the property pool. Each party who has future needs would have an adjustment in their favour by the assessed percentage. Thus it could be that one of the parties may have a long terms health issue or illness that requires treatment and intervention long in to the future so that it maybe reasonable to give that party 5% more of the property pool (making the distribution 55%/45% OR 65% /35% on the above example) Obviously the percentage of the adjustment would be determined by the extent of the pool as 5% of a $1,000,000 pool is different substantially to 5% of a $50,000 pool. The smaller the pool of assets, the greater would be the impact of the future needs adjustments.

The future factors to be identified and assessed are found in the Family Law Act 1975.[3] Age and state of health is referred to in the Family Law Act as a relevant future factor. Often a party to the relationship may have a serious health problem that warrants an adjustment in their favour at the third step. In the case of Lawrie v Lawrie[4] where the husband had cancer, the court held the view that where it is established that the future financial needs of a party will terminate upon the happening of a definite future event, it is proper to take that into account. Diagnosis of terminal illness may impact on the final proportion of the assets allocated to each party.

In the recent case of Fontana v Fontana[5] as at the date of hearing the Husband was 49 years of age and the wife 43. The parties had been in a relationship for 15 years. They had a 15 year old child. They had set up a professional practice together before separation. The trial Judge found that the wife was a successful businesswoman with an annual net income of $200,000. The husband had serious health problems – renal failure and diabetes. At the time of the hearing, the husband was dependent on dialysis three to four times a week. His income protection insurance guaranteed him an annual income of $ 150,000.

The net pool of assets was approximately $1,847,273. The trial Judge adopted a ‘two pools’ approach, choosing to treat superannuation assets and non superannuation assets differently as the parties had contributed differently to the acquisition, conservation and improvement of these assets. As such, the net pool of non superannuation assets was calculated to be $ 1,726,663 and the net pool of superannuation assets stood at $ 120,610.

The trial judge found that the contribution based entitlement of the parties in relation to the non superannuation asset pool to be 52/48 in the wife’s favour. His Honour made a further 4.5% adjustment in favour of the wife on account of her future needs under Section 75(2) of the Family Law Act. Thus the wife’s final entitlement to non superannuation assets was bumped up to 56.5% as against the husband’s entitlement of 43.5%. In relation to the pool of Superannuation assets, the Judge held that there be a division of 55/45 in the wife’s favour.

The trial Judge stated in his judgment that he had considered the future needs of the parties ‘collectively and cumulatively’. His Honour noted that the husband was in poor health and the wife was not, but placed no weight on those facts standing alone and unrelated to the earning capacity of the parties or the child. His Honour observed that he was satisfied that the wife would be the parent principally responsible for the welfare of the child and would be the parent providing more and more for the ongoing needs of the child as the husband’s health unfortunately deteriorates. The adjustment of 4.5% in the wife’s favour was made in this context.

In appeal, it was argued on behalf of the husband that the trial judge had erred in adjusting the entitlement of the wife by 4.5% (out of non superannuation assets) which resulted in the wife receiving $ 77,700 more out of non superannuation assets than the husband and in failing to make any adjustment in favour of the husband in circumstances where:

  • The trial judge was unable to find that the husband would receive a kidney transplant prior to January 2017, without which his capacity for employment would continue to be considerably limited by his ongoing need for regular dialysis and his diabetes;
  • The trial judge correctly found that there was no evidence that the wife suffers from any present medical condition or ill health;
  • The wife’s capacity to earn was found to be superior to that of the husband;
  • The trial judge did not find that the financial burden of caring for the parties’ child would be borne inequitably;
  • The evidence did not establish that the retention of the parties former matrimonial home warranted an adjustment in the wife’s favour;

Life expectancy may be a relevant future factor to be taken in to account in property settlement. His Honour observed “I am satisfied that the husband’s needs, whether he has a transplant or not, are likely to subsist for a shorter time than are the wife’s needs. With some regret this is a matter I must take in to account in the wife’s favour.”[6] The husband’s general practitioner had given evidence that the prognosis for the husband was for a significantly reduced life expectancy. The doctor had conceded in cross examination that there was a significant range in life expectancy without a transplant and testified that the husband’s ability to work has significantly diminished. However, His Honour did not specifically make a finding in relation to life expectancy. He concluded “I am unable on the material available to me, to put a realistic figure on his life expectancy from this point…….”.[7] It was observed that the husband suffered from diabetes, which in the past had not been adequately managed. Indeed his doctors had sounded the warning that unless the husband managed his diabetes properly and regardless of what occurs in respect of his kidney difficulties, his life would be substantially shortened. His Honour observed “I am unable, however, to make an educated guess, let alone a finding, of what his life expectancy will be in this situation”.[8]

The learned trial judge’s conclusion that the husband’s future needs are likely to subsist for a shorter time (whether he had a transplant and overcame his health crisis or in the alternative, succumbed to his illness) than the wife’s, without a finding of fact by His Honour both as to the wife’s future needs on the one hand and the life expectancy of the husband on the other, was held to be a misapplication of judicial discretion. The Appellate Court, in allowing the appeal held that His Honour had erred in the way he took the husband’s life expectancy in to account.

By comparison, in the matter of  of Lawrie v Lawrie[9] the husband who had terminal cancer had and agreed life expectancy of approximately six (06) months. The court was able to  properly take in to account the future needs of parties predicated upon the happening of a definite future event, the evidence as to the husband’s life expectancy being clear and not in controversy.

In the matter of S&P[10] the husband was HIV positive and had an agreed life expectancy of five (05) years, based on medical evidence. The Full Court of the Family Court cited with approval the decision in Lawrie and endorsed the approach of the exercise of discretion based on a finding of fact.

The guidance provided by the decisions in  Lawrie  and S&P  has been followed where there has been clear expert evidence which was accepted, relating to shortened life expectancy of a predictable duration arising from a medical condition.[11]

For more information regarding property settlement and life expectancy

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[1] Stanford v Stanford [2012] HCA 52; (2012) 293 ALR70 at [79][80]

[2] Hickey v Hickey & the Attorney General of the Commonwealth (Intervener) [2003] FAMCA 395; (2003) FLC 93-143 at [39]

[3] S 75(2) in relation to married parties; S 90 SF(3) in relation to de facto parties

[4] (1981) FLC 91-102

[5] [2016] FamCAFC 11

[6] [2016] FamCAFC 11at [544]

[7] [2016] FamCAFC 11at [523]

[8] [2016] FamCAFC 11at [524]

[9]  (1981) FLC 91-102

[10] Unreported, Family Court of Australia, 29 April 1997 per Fogarty, Lindenmeyer and Finn JJ

[11] T&D & Anor [2006]FamCA 1248, Miklic & Miklic and Anor[2010]FamCA 741; Jurlina & Jurlina[2014]FamCA284