When we meet with new clients, often their first question is whether they should be bothering to seek family law advice as a result of a common misconception that property settlements are unnecessary or inappropriate to a client’s personal circumstances. Clients are either unaware of their legal entitlements and/or they do not believe there is anything of value to be divided up. However, when a marriage or de facto relationship comes to an end, it is imperative that property settlement is finalised or, at the very least, that each person is aware of their entitlements and obligations.
Is a property settlement really necessary?
Short answer, yes. A property settlement ensures that all financial ties with your ex-partner are finalised and there is no ability for one party to later claim against the other down the track. The reason this is a risk is because the court will consider the property and financial interests available for distribution between the parties, including property acquired after separation, as at the time the court is asked to make a decision and not at the date of separation. Examples include properties, businesses, trusts or assets acquired after separation (even with another person), increases in superannuation entitlements and savings, and increases in the value or equity of the former family home or investment properties. In some cases, one party may inherit a large sum of money or win the lottery post separation and this will be considered by the court if the court is requested to make property settlement decisions. Equally important, there are also practical issues regarding each party’s obligations and responsibilities after separation, such as who will be responsible for the mortgage, loan and credit card repayments. Difficulties can arise if your ex-partner does not pay the mortgage or other payments as promised, which may then impact your credit rating and your ownership of property.
But there is no “property” to settle…
Couples with modest property, or who are income rich and asset poor, often think that there is nothing to settle. Separate to the risk associated with property acquired after separation still being subject to a claim from your ex-partner, there are often other financial interests that should be considered. For example, superannuation accounts can be divided between couples. You might also be entitled to spousal maintenance, which is your ex-partner providing you with financial support. In some cases, couples have not shared all of their financial information with each other as one may take care of the family’s finances for both parties, or sometimes because one has kept their information private from the other.
Following the breakdown of a de facto relationship or marriage, parties have an obligation to make full and frank disclosure about their financial circumstances. It is important to seek legal advice about these matters as your lawyer will be able to assist you in not only finding out whether there is property to settle, or spousal maintenance to be paid, but also your entitlements to property settlement generally.
Formalising property settlements
The Family Law Act sets out the process and law regulating a property settlement, however each matter is determined on a “case-by-case” basis as every relationship and situation is different; and the court has a wide discretion accordingly. Upon meeting with a client for the first time, we work through the court’s four-step process in determining a fair and equitable property settlement and advise you of your possible entitlements.
Often through negotiation and/or mediation, agreement can be reached and finalised through either:
- consent orders, which is a written agreement that is approved by the court. If the court is satisfied that the proposed settlement is just and equitable, the orders will be made by a registrar without the need of a court appearance;
- binding financial agreement, which is a binding legal agreement about the financial arrangements which does not require the court’s approval but does require independent legal advice prior to execution.
If agreement cannot be reached between the parties themselves, or via their lawyers, there are processes that you can jointly choose to participate in to help you reach that agreement such as mediation or arbitration. Your lawyer will discuss with you the pros and cons of these processes and whether they are suited to your case. It is possible to apply to the court to make a decision as to the division of the property, however this is considered the last resort.
An important issue to consider in deciding whether or when to seek advice is the time limitation periods set out in the Family Law Act. Separating parties to a marriage must apply to the court for a property settlement within 12 months of a divorce order coming into effect, while a de facto couple must apply within two years of their separation. Failure to commence property settlement proceedings within these time limitations may result in a loss of ability to apply to the court. Although it is possible to seek the court’s leave (permission) to apply for property settlement “out of time”, this is not guaranteed and can be costly.
There are very few situations where it is in one party’s interest not to have a property settlement, and even then you may face the risk of your ex-partner seeking a claim against you in the future.
It is important to obtain legal advice to ensure that you are making an informed decision. An experienced family lawyer Toowoomba will help you work through the process of determining your entitlements and formulate a suggested course of action to settle the matter in an expeditious manner, and then act on your behalf to secure the best possible result for you so that you and your family can begin the process of moving forward. Contact our team to arrange your fixed-fee no obligation initial appointment.