In its simplest form, a ‘property settlement’ (often called a property adjustment) is the division of the assets (and allocation for responsibility for associated liabilities) belonging to spouses or de facto partners.
If you wish to achieve a ‘clean financial break’ with your spouse or de facto partner then you should complete a property settlement. Some people decide to complete a property settlement without actually ‘formalising’ it i.e. there is an informal agreement about who is keeping what, but the settlement is not properly documented. This is very risky.
Some of the risks of not ‘formalising’ your property settlement in accordance with the Family Law Act 1975 (i.e. doing a ‘handshake deal’ instead) are as follows:-
- There is no record of your property settlement which is binding and enforceable. Note: simply writing your property settlement on a piece of paper does not make it binding and/or enforceable;
- You leave yourself open to future claims. YES it is possible for your spouse or de facto partner to bring a claim against you in the future if you do not formalise a property settlement post separation. The fact that certain assets may be held in your sole name (or in a company name or Trust), does not mean that a claim cannot be made against that property or asset by your spouse or de facto partner;
- You miss out on stamp duty and other tax exemptions which may otherwise apply e.g. upon the transfer of real estate.
How to formalise a property settlement
There are two ways to formalise a property settlement:
- A Financial Agreement; or
- A Consent Order
These are very different legal products. They are able to be enforced, and altered, in very different ways. Advice should be sought as to which is the most appropriate for your circumstances and objectives. A Financial Agreement can only be entered into if each party receives independent legal advice. It must also comply with the strict requirements of the Family Law Act 1975. A Financial Agreement can only deal with financial matters i.e. property settlement and spousal maintenance. A Consent Order is, as its name suggests, a document recording the agreed outcome, and which is approved by a Court as an ‘Order’. A Consent Order can cover both financial and parenting matters (excluding child support matters).
If you would like further advice about property settlements or any other family law matter then please do not hesitate to contact our office to make an appointment with one of our lawyers.