Four key facts you need to know about your property settlement
Written by Brooke Keane
Edited by Sam Ferraro
Under the current Family Law Act 1975 legally married couples and de facto couples, including same-sex couples have essentially the same rights in relation to a property settlement following the breakdown of the relationship.
What is a property settlement?
Property settlement refers to how the assets and liabilities of married or de facto couples are divided between them after the relationship ends. This generally includes assets and liabilities and superannuation held in the parties’ joint names and their separate names. Even assets held in one spouse’s name may ultimately become the asset of the other spouse as a result of the property settlement.
The final division of the assets and liabilities (the property settlement) may arise through the decision of a Judge or by an agreement reached between the parties.
We have agreed, now what should we do?
Often separated couples are able to reach an agreement as to how they want to divide up their assets and liabilities. This agreement can be legally formalised in one of two ways:
1. An Application for Consent Orders; or
2. A Financial Agreement (often referred to as a Binding Financial Agreement or BFA).
An Application for Consent Orders involves the completion of an Application for Consent Orders Form and the Minutes of Consent (the terms of the agreement reached). Once these documents have been signed by both parties, they are filed with the Family Court of Australia. A Registrar of the Family Court then reviews the documents and if satisfied that the agreement reached is within the range of what the Court would likely consider fair, will make the Orders. Once the Court makes the Orders, they become binding on both parties and are then enforceable. Sometimes formalising the terms of an agreement through an Application for Consent Orders can be less expensive as it is not necessary (although it is a good idea) to get independent legal advice.
The Family Law Act allows married and de facto couples to reach their own agreement without the oversight of the Court and without the need to satisfy the Court that the terms of the agreement reached are fair. There are strict requirements set out in the Family Law Act which must be complied with in order for the Financial Agreement to be binding and so it is a document that is best prepared by an Lawyer experienced in Family Law. Financial Agreements can tend to be more expensive as both parties need to have independent legal advice before they sign the Agreement in order for it to be binding. The Financial Agreement will become binding (and enforceable) on the day it has been signed by both parties (when the second spouse signs) and the certificates of advice have been completed by the parties’ legal representatives.
Some separated couples may choose to formalise the terms of their agreement through a Financial Agreement as it can sometimes be quicker than waiting for the Family Court to review and approve an Application for Consent Orders.
We trust each other, why do we need to formalise our agreement?
Even when separated spouses reach an agreement amicably without the need for lawyers or litigation (court proceedings), it is still important for the agreement to be formalised in a legally enforceable form.
It does not matter if you had already divided up the assets and moved on with your life. If there are no Orders or Binding Financial Agreement then a separated spouse can apply to the Court for Orders granting them further assets.
By formalising your agreement, you avoid the risk of having to give your spouse more later on and you avoid the unexpected cost and stress of defending such an application. This gives you and your ex the freedom to financially move on with your lives with certainty that this part of your relationship is well and truly over.
Failure to formalise the arrangement may also leave in existence rights under the laws of succession so that your ex-partner may make a claim in the event of your death.
Importance of finalising your property settlement promptly after separation
The end of a relationship can be a traumatic, stressful and confusing time and often the formalising a property settlement is not high on the never ending list of things that need to be taken care of.
Married couples have twelve months from the date of divorce (not separation) to file an application for final property orders in the Family Law Courts. Often many years will pass before a separated spouse decides to apply for a divorce. This means, for example, if separated spouses do not get divorced for say, 10 years, then either party can apply to the court for property orders 11 years after separation!
De facto spouses have two years from the date of final separation to bring an application for a property settlement before the Family Law Courts.
It is possible for a spouse to get the Court’s permission to start proceedings outside of these timeframes, however applying for permission (leave) to file out of time can be quite costly.
Separate from making sure you do not run out of time to apply to the Court for property orders are the emotional benefits to resolving, whether by agreement or court proceedings, the financial aspect of your relationship as quickly as possible. While you and your ex remain financially connected to each other, it is difficult to move on emotionally and begin to heal. Also it can mean that you remain in a financial limbo. If you and your ex have children, having financial matters still unresolved often leads to further conflict and tension between both of you which may impact upon the emotional wellbeing of the children. Even where parents try their best to shield their children from their dispute, many children still pick up on their parents’ tension and stress.
If you need more information or would like advice specific to your situation please contact our office to arrange a consultation with one of our experience Family Law solicitors.