What is a property settlement? Do I need one?
Relationship breakdowns can be an incredibly stressful time in a person’s life, and while dealing with the realities of a separation may be daunting, it is important to ensure that you are taking the right steps for you and for your family.
Going through a separation does not always mean that you will need to involve lawyers. There are some cases where people are able to divide their property amongst themselves and come to their own arrangement for their financial affairs. However, if you are unsure about your entitlements, or you do not know how to ensure that the arrangement you have come to will be legally binding, seeking advice from an experienced Family Law team should be your first step.
The property settlement process itself involves four steps, these steps are applied whether or not the matter is heard by the Family Court or determined between the separating couple or their lawyers.
The Four Steps:
Step 1: Identify and Value the Property Pool
All assets, liabilities, and financial resources currently owned by both parties, must be identified and given a current market value. This includes real estate, vehicles, bank accounts, investments, businesses, superannuation, debts, and liabilities.
This step involves the exchanging of financial information between the parties, which is commonly referred to as ‘financial disclosure’.
Step 2: Assess Contributions
Under section 79 (for marriages) and section 90SM (for de facto relationships) of the Family Law Act 1975 (Cth), the financial contributions (e.g., income, inheritances) and non-financial contributions (e.g., homemaking, child‑rearing, home improvements) made by each party throughout the relationship are considered. Any contributions made by the parties post-separation are also considered. The weight that each party’s initial contributions to the relationship, meaning whether they entered the relationship with any assets, will depend on the length of the relationship amongst other factors.
Step 3: Evaluate Future Needs
Each party’s future needs are also assessed and considered. Factors influencing a party’s future needs include things such as each party’s age, health, income‑earning capacity, and the care of the children of the relationship.
Step 4: Determine a Fair and Equitable Outcome
Finally, it must be determined whether the proposed division of property is just and equitable in all circumstances, taking into account the first three steps. This includes weighing up the short‑ and long‑term effects on both parties.
making the Agreement Binding
If the Court makes property orders after a hearing, these orders are binding and enforceable as soon as they are made.
If an agreement has been reached without the intervention of the Court, then there are two ways to ensure that the agreement is legally binding.
1. Consent Orders
An Application for Consent Orders can be filed with the Court in the terms of the agreement. Consent Orders carry the same weight as a court-ordered settlement but avoid adversarial hearings.
The Application for Consent Orders can be complicated, and it is important to ensure that it is drafted correctly as it is difficult to have the Orders amended once they are made by the Court.
2. Binding Financial Agreements (BFAs)
Binding Financial Agreements are legally enforceable contracts which set out the financial agreement that you and the other party have reached. Binding Financial Agreements have strict requirements that lawyers have to follow when drafting to ensure that they are legally binding. Binding Financial Agreements;
- Can be entered before, during, or after the relationship.
- Must be in writing and accompanied by independent legal advice to be binding.
- If drafted correctly, work by setting out the agreement between parties without the need for the matter to be considered by the Court.
There are many benefits to ensuring that your property settlement is legally binding, including the fact that Consent Orders or a Binding Financial Agreement can be relied upon for certain Transfer or Stamp Duty exemptions. It also provides clarity for each party and often allows people to begin moving on with their lives.
Even if you and your ex-partner have reached an agreement for the division of your property that you believe is fair and equitable, it is important to seek legal advice to ensure that you have taken the right steps in reaching the agreement. It is also important to seek legal advice to confirm that your agreement would be determined to be fair and equitable by the Court.
If you are unable to reach an agreement about the division of your property, we can assist you. However, there are certain time limits that apply to making an application for property orders depending on whether you have been married or in a de-facto relationship. It is important that you contact us as soon as
possible after a separation so that we can ensure that your matter is progressing within those time constraints.
By seeking the assistance of our experienced family law team, you can ensure that you are aware of your entitlements, your rights, and your obligations in a
property settlement.
