When a marriage or de-facto relationship has ended both parties need to finalise their financial relationship.
A property settlement provides certainty by finalising your financial relationship. The document effecting a property settlement will list all the assets and liabilities of the relationship, allocate an agreed value, and then provide a percentage that each party will receive. It may also cover the following:
Clients sometimes think they have sorted things out with their partners by signing a letter dividing up the property and promising to be bound by it.
Unfortunately any document that you sign will not be legally binding on either party. For a written document commonly referred to as a Financial Agreement to be legally binding on both parties, each party must have:
Clients often think they will save money and sort their affairs out on the back of the envelope at the local coffee shop. If you stop and think that the property settlement must consider the financial history of your whole relationship from start to finish and then divide up the assets taking into account not only the financial contributions but also indirect contributions such as a home maker and parent you will soon appreciate you need more than an envelope.
The following is a list of just some of the factors that require consideration:
When should I see a Lawyer?
What is surprising to many clients is that the Court doesn’t look at the property at the date of separation; they look at it at the date of the proceedings, and, ultimately, the date of Trial.
Therefore if your former partner acquires substantial debt after separation (a not uncommon scenario) this is brought into the property pool. The financial assets at the time of separation and on which you based your settlement can be halved by a new business overdraft a new partner or just plain old personal items such as jet skis. The court will not assign the new debt to the party that incurred it. It will (except in cases of extreme waste) share this debt between the parties.
If you want control over the assets of the relationship and where they end up we encourage you to see us as soon as possible.
What are the Time Limits for Property Settlements
If you have divorced then you have 12 months from the date of the divorce to finalise your property settlement. For de facto relationships 2 years from the date your de facto relationship ended. After these dates you are barred (with only a few exceptions) from initiating court proceedings to enforce a property settlement.
Stamp Duty Benefits of a Property Settlement
Apart from achieving financial certainty between the parties there is a 100% stamp duty relief for all real estate transfers covered by a property settlement. This saving can more than pay for the cost of the property settlement. You can also defer capital gains tax on real estate transfers recorded in the financial agreement.
Consent Orders or Binding Financial Agreements
You may have heard of the terms financial agreement or consent orders.
If parties can agree to a division of assets then the division can be recorded in consent orders and filed in the Court. The Court scrutinises the consent orders and if it is satisfied that it is just and equitable between the parties it will seal the consent orders making them binding between the parties.
If the orders are breached, an application can be made to the Court to enforce the terms of the order. Consent orders can be prepared by either party’s lawyers and compared to a court action are a simple and relatively inexpensive procedure to effect a property settlement. There is no requirement for either party to attend Court if consent orders are filed. Both parties must receive independent legal advice.
Another option is to formalise a property settlement in a document called a Binding Financial Agreement. This is an agreement between the parties that has not been scrutinised by the court system.
A party to the agreement can go to court and challenge the validity of the agreement and judges if they perceive the terms are not just and equitable are more than willing to overturn the agreement. Due to this ongoing uncertainty we recommend that our clients avoid binding financial agreements and obtain court approved consent orders.
Do I have to go to Court for a Property Settlement?
Most cases do not go to Court. The Family Court rules are aimed at making the parties negotiate and finalise a property settlement without the necessity of a Court action. Even when Court action is commenced, the possibility of a settlement is left open so that very few cases end up in a final Trial.
Things You Should Avoid
When you are stressed you naturally turn to your friends, relations or work colleagues for advice as to what you should do and what you are entitled too. Unfortunately these people are not lawyers nor do they know the financial history of your relationship. Further does their off the cuff advice weigh and consider some or any of the matters we have raised here.
Family law cases need be looked at on a “case-by-case” basis. Every relationship and situation is different; next doors apples are not the same as over the roads oranges. Your case deserves the consideration of an experienced professional.
What Mumfords Lawyers Will Do
Mumfords Lawyers have been doing property settlements for twenty years. Although we have seen almost everything we appreciate each case is different. The fact that we have been doing them so long means that we can: