What are a party’s ‘future needs’ in family law property matters?

When determining a party’s entitlements in a family law property settlement, the Court adopts a 5-step process, as follows:

1. Determining whether it is just and equitable to divide the parties assets;
2. Identifying and valuing the assets, liabilities and financial resources of the parties;
3. Considering the contributions that each party made, both financially, non-financially and as a parent/homemaker;
4. Considering the ‘future needs’ of each party; and
5. Considering what outcome would be just and equitable in the circumstances.

This article will focus on the important fourth step, the assessment of each party’s future needs.

Future Needs Adjustment

It’s common for the Court to make an adjustment in favour of one party on account of their greater future needs.

The Family Law Act 1975 (Cth) (“the Act”) sets out the factors that a Court may consider when determining whether an adjustment for future needs is appropriate. For married couples, these are found at section 75(2) of the Act, and for de-facto couples, section 90SF of the Act.

The Court may consider the following when assessing future needs:

1. The age and health of the parties;
2. The income, property and financial resources of the parties
3. The income earning capacity of the parties;
4. Whether either party is caring for a child of the relationship;
5. Whether either party is financially responsible for any other person;
6. Eligibility for a government pension or superannuation payments;
7. The standard of living of each party, that is reasonable in the circumstances;
8. The duration of the relationship and the extent to which it has affected the earning capacity of either party;
9. If either party is now living with someone else, the financial circumstances of that arrangement;
10. The terms of any proposed or existing property Order;
11. The terms of any proposed or existing Financial Agreement; and
12. Whether child support is being paid by one party to another.

The above list is not exhaustive however, are among the most common determining factors.

If the Court is satisfied that one or more of the above factors exist, it can order an adjustment in favour of the party who demonstrates ‘greater’ future needs of the overall assets available for division.

A common example

Perhaps the most common example where a future needs adjustment is made is when one party, lets call them Parent A, has remained in the workforce for the duration of the relationship while the other party, lets call them Parent B, has taken substantial time off work to care for and raise the parties’ children.

By virtue of halting the progression of their career to raise the children, Parent B has been unable to develop and progress their career to the extent of Parent A, who has remained working throughout the relationship, gaining further experience and pay increases on the way. After separation, Parent B remains the primary caregiver to the parties’ children. Should Parent B re-enter the workforce, they will be doing so with a reduced income earning capacity as compared to Parent A, due to their time away from the workforce. In these circumstances, it is open to the Court to make an adjustment of the final division of the property pool in Parent B’s favour due to their reduced income earning capacity.

It is important to remember that future needs are only one step in a 5-step process, and there is no one size fits all approach to property settlements.  Even a party who has greater future needs, like Parent B in the example above, may not receive a greater portion of the asset pool due to other circumstances of the relationship.

The Court’s power to make a future needs adjustment is discretionary, and there is no set formula or mathematical equation that is applied to the parties’ finances.

Conclusion

The Court is not required to make a future needs adjustment, and any adjustment made will be in the context of the particular set of facts of that relationship. There is no formula applied nor is there a guarantee of an adjustment.

Our Family & Relationship Law Team at Coulter Legal are experienced in providing advice on family law property matters . Please do not hesitate to contact our office on 03 5273 5273 to arrange an initial consultation, free of charge, to discuss your personal circumstances and how we may assist you.