When involved in a divorce, one partner might find themselves in a less advantageous financial situation. Meaning, it might be difficult for them to maintain a reasonable standard of living for themselves and their children simply because they do not have the same level of income or assets that their spouse had. In such situations, a partial property settlement can be entered, allowing for the spouse’s and possibly the children’s needs to be adequately taken care of. This partial property settlement is not always concrete and can be adapted to changing circumstances.
At What Point in Time Can a Party Receive a Partial Property Settlement?
One of the divorcing parties can receive a partial property settlement before the divorce and division of assets is finalized. This is to ensure that the party with lesser assets or a smaller income, can manage financially.
This money can be used for a variety of purposes such as attorney fees, rent/mortgage costs, food, clothing, educational expenses and many more necessary costs.
Why Would a Spouse be Entitled to a Partial Property Settlement?
A spouse who is in a financially disadvantageous position might be entitled to a partial property settlement if they can show any of the following;
- Financial Distress
- Reasonable Need
- Lack of sufficient income
- Child needs including; childcare, educational expenses, extracurricular activities
- Equitable Justice
Where do the Funds come from for a Partial Property Settlement?
The funds can come from a variety of sources;
- Available liquid assets
- Liquidation of some of the assets
- Refinancing a mortgage
How Does A Partial Property Settlement Affect the Final Settlement Agreement?
In theory, the partial property settlement is considered part of the receiving spouse’s final settlement agreement. Hence if the couple has assets worth $100,000.00 and the receiving spouse is allotted $25,000.00 as part of the partial property settlement, they may only be entitled to another $25,000.00 if the Court determines the couple should share equally in the assets.
What are the Exceptions to Full Credit for a Partial Property Settlement?
However, there is an exception to this general rule. The exception is known as a re-characterization of the partial property settlement monies. This can happen to the entire amount or a part of the entire amount. For example, if the receiving spouse used $10,000.00 of the partial property settlement to put a down payment on a house, it might not be considered eligible for recharacterization because the money has been spent as an investment in the future that will gain in value. But, if the money was spent purely for living expenses, it is possible the court will recharacterize the funds spent as being part of the ordinary cost of living and the funds will not be added back into the asset pool. Hence the asset pool will be smaller, and the division will not, necessarily, reflect that one party already received the amount of money recharacterized.
Partial property settlements can be complex and require quite a bit of negotiation on the part of both parties. Therefore, when considering entering a partial property settlement, both parties must be well advised by legal counsel.
If you need assistance with a legal matter, please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to help clients understand the full ramifications of all your legal needs. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 770 780.