When a marriage or a de facto relationship ends, the parties should always finalise their financial ties with one another. This may involve the transfer of ownership of real estate, cash, superannuation or other property from one party to another. For example, if the matrimonial home is in joint names the parties may agree that the house be sold and the proceeds divided. Alternatively, the parties may agree that one party receives the house and makes a cash payment of some nature to the other party to ‘buy out’ their interest.
When you are separating, it is important to obtain legal advice from a Solicitor specialising in family law, in order to determine your entitlements.
2. How do I formalise our property settlement?
Any agreement reached between you and your former partner should always be formalised (recorded legally).
There are two ways of recording a property settlement agreement between two separated parties:
- A Consent Order; or a
- Binding Financial Agreement.
A Consent Order is an Order which both parties have agreed to and the Family Court approves before making the Order, to ensure it is just and equitable.
A Binding Financial Agreement is an agreement between parties which has not been scrutinised by a Court to ensure it is just and equitable however the parties must consult with a Solicitor to make the agreement valid.
You should talk to your Solicitor about which form of agreement is right for you.
3. Why is it important to formalise your property settlement?
There are several reasons:
- A Consent Order & Binding Financial Agreement are legally binding. This means that if the other party does not comply with the agreement, you have recourse to the Court to enforce compliance of the agreement.
- It finalises your financial relationship with your former partner. This means that your former partner cannot make a further property settlement claim against you.
4. Why is it important to do your property settlement promptly after you separate?
If you do not finalise your property settlement promptly after separation, this means your financial ties with one another have not been severed and you leave yourself open to a property settlement claim being made against you in the future, subject to relevant time limitations.
The value of the asset pool is not the date of separation it is when you make an agreement or when a Judge determines your matter.
This means that if your super interest increases, or you acquire a new asset or you improve the value of an asset post separation, but prior to a property settlement, it forms part of the property pool to be split between you and your former partner.
You should not leave yourself open to your improved superannuation entitlements, or assets acquired/improved by you post separation, forming part of your property settlement.
Alternatively, if your former partner sells an asset or wastes away funds in the property pool, post separation, and applies the income for his/her own benefit, the property pool is reduced therefore reducing your entitlements. This is because the Court cannot deal with assets that no longer exist.
The only caveat to the above is that the Court has discretion to take into account financial contributions of the parties or wastage of matrimonial assets post separation.
It is in your interests to formalise your property settlement sooner rather than later so that you can re-establish your financial position without a potential property settlement application hanging over your head in the future depending on time limitations.