Do I need to have a property settlement?

So you’ve just separated from your partner. You’ve got an understanding about your financial position, and theirs, and you’ve reached some agreements about who will keep what. Your friends are telling you – “You should have a property settlement!”

So, what next?

What is a property settlement?

A property settlement is about deciding who keeps what property, and then documenting it. (Property includes a whole range of things from houses, to money, to superannuation…Even pets!)

Deciding ‘who keeps what’ involves considering what property needs to be transferred and what property will each party in a separated couple will retain, so that legal ownership reflects what is fair (fair either according to you and your ex, or according to the law).

How do you document a property settlement?

Formalising a property settlement is the process of documenting your in-principle agreement into a legally binding and enforceable set of obligations and declarations.

There are two ways of formalising your agreement in relation to financial matters:

1.????The first is through Consent Orders which are filed with the Family Law Courts and, if made, will create a valid, legally enforceable agreement between you; or

2.????The second is a Binding Financial Agreement whereby both parties must receive independent legal advice before signing a bespoke contract between them. This document is not filed with the Court.

Even if you are in agreement about the division of property, there are still benefits of documenting your arrangement.?For example, the transfer of real property and motor vehicles may be exempt from the payment of stamp duty. Having a formal legal document can mean that the person who has transferred their interest in a property is entitled to a stamp duty exemption on the purchase of a new property in the future. Having a formally documented agreement also protects you from your ex-partner making a claim against your assets in the future (think about protecting future wealth like inheritances, income or if you’re lucky enough – lotto wins).?

Some legal considerations to be aware of

The division of assets (including superannuation) after separation is dealt with by the Family Law Act. The Family Law Act also contains provisions that deal with dividing income between separated couples (called spousal maintenance).

There are a couple of things to be mindful of:

1.????Time limits

There are time limits on filing Consent Orders with the Courts or starting a Court action if you and your ex cannot agree about the division of assets. For married couples, you need to make a Court application within one year from the date of a Divorce Order. If you were in a de facto relationship, this timeframe is two years from the date of separation. After these timeframes have lapsed, leave of the Court is required to make your application.

However, this does not mean that a property settlement cannot occur at any time between separation and the end of these timeframes. You can even have a property settlement before lodging your Application for Divorce.

You should seek legal advice about the process for getting leave of the Court to apply out of time, if your timeframe has lapsed.

2.????Getting information to make good decisions

The Federal Circuit and Family Court Rules places a duty to make timely, full and frank disclosure of all information relevant to the issues in dispute.

This means you and your ex-partner may need to exchange documents such as tax returns, proof income, bank statements and superannuation statements.

3.????Knowing the considerations of the Court in determining what’s ‘fair’

Having regard to what the Court considers is relevant in a property settlement may guide you on what is fair, but it doesn’t have to be all that you look at. Often other goals, concerns or interests of a separating couple are important to consider in an out of Court agreement.

There are four steps that the Court would go through in determining the division of property, after they satisfy themselves that there needs to be an adjustment to one party:

1. Valuing and identifying of the asset pool (including assets, liabilities and superannuation);
2. Assessing the contributions made each person, including non-financial, financial, parenting and homemaker contributions;
3. Adjusting for any future needs considerations, such as age, income and earning differentials, parenting responsibilities and health; and
4. Ensuring the division is just and equitable in the circumstances.

What are the risks if I don’t have a property settlement?

If you do not formally document your property settlement agreement, then you are at risk of your former partner changing their mind later or ‘having another bite of the cherry’ to put it colloquially. As outlined above, there are time limits that apply for couples to have a property settlement. Without formalising your property agreement, you are at risk of ‘re-opening’ any informal agreement for a number of years. This can mean that assets you acquire after separation will form part of the pool of assets to be divided even years after the fact.

A property settlement can only happen once in each relationship (unless it is set aside by a Court or by further agreement).

If you are in the process of negotiating a property settlement and have further questions, or you need assistance with the transfer of real property to or from your former partner, get in touch with us so that we can give you your options and help you make an informed decision.