One of the most traumatic times in an adult’s life comes in the unfortunate event of divorce or separation from a long-term partner. But despite the anger, stress and disappointment, it’s crucial that an estranged couple address and resolve the financial ties they formerly shared, not least to ensure one party can’t make further property settlement claims against the other into the future.
Most commonly this means determining ownership of real estate – often the family home – though settlement can also extend to business, investment portfolios, superannuation and other assets such as cars.
In terms of property, a number of courses may be taken, from selling the house and dividing the proceeds, to having one party assume full ownership and ‘pay out’ the other in cash or other assets. Some of the issues involved are outlined below but there is no substitute for expert legal advice from a firm experienced in property settlements between ex-spouses.
What needs to happen for a property settlement to take place?
Two important factors in reaching a property settlement with an ex-partner are that it be legally enforceable and that it is reached within certain time limits.
Regarding the first factor, while there’s nothing stopping you reaching an informal agreement with your ex-partner on how to divide your property, it is usually not recommended because such an agreement is not legally binding and can present considerable difficulties should there be subsequent dispute over its terms. More preferable are consent orders or binding financial agreements.
Consent orders
Consent orders are an agreement between ex-partners, approved by the court and then made into a court orders. Because the court aims to make an agreement which is final and prevents any further legal action, these orders are very difficult to change after they have been made, making it even more important to seek trusted legal advice before signing them.
Under the Family Law Act, the court will determine whether any agreement is fair and equitable before it will make consent orders.
Any attempt to cancel consent orders in property disputes, once made, will require one party to prove that there was fraud (dishonesty); that the orders are impractical to carry out; or that there are exceptional circumstances involved.
Binding financial agreements
A financial agreement is an agreement between parties which has not gone before a court to ensure it is just and equitable.
Married or de facto couples can make such legally binding financial agreements before, during or at the end of a relationship. In the event of a relationship breakdown, a financial agreement about property will only be legally enforceable if it signed by both parties and contains a statement to the effect that each party received independent legal advice prior to signing the agreement on how it will affect his or her rights, and whether or not the agreement is to his or her advantage. Each party’s lawyer must also sign a document saying independent advice was furnished.
Suffice to say, expert legal advice is vital if you’re making a binding financial agreement, or to assess which of the methods outlined above for formalising your property settlement, is most appropriate in your particular circumstances.
Time limits
Another compelling reason to seek good legal advice is that an experienced lawyer will make sure that consent or financial orders are resolved within the mandated time limits.
In short, you must apply for a property settlement either:
- within a year of the date your divorce took effect;
- within two years of the date your de facto relationship ended.
After these timeframes, only special circumstances will allow you to apply to the court for a property settlement.
It’s important to resolve property settlements as soon as practicable after separation because what is sometimes forgotten is that the court, in determining each party’s entitlement in the settlement, assesses the property pool to be divided at the time of the trial, not the time of separation.
This means that if, for example, you acquire a new asset or the value of an asset improves post separation, the extra value will be subject to the property settlement.
In any event, the aim of any property settlement should be to achieve an equitable result that is to the satisfaction of both parties, within the prescribed time limits. The best way to meet this aim is to consult a lawyer with a specialist background in negotiating these settlements for immediate advice and guidance.
