If you have reached an agreement with your former spouse or de facto partner as to how to divide property between you, you may believe that you have tied up all lose ends and that any financial relationship between you has been severed. Unfortunately, you are mistaken.
Unless your property settlement is documented in Consent Orders (and approved by the Family Law Courts) or a Binding Financial Agreement, it is an “informal property settlement” and it is not legally binding.
Whilst there is no law preventing you from making an informal property settlement, it means that you are vulnerable to your former spouse or partner making an application to the Family Law Courts for a greater share of the property pool in the future. This means that months or years down the track, even after you may have re-partnered or purchased new property, your former spouse or partner can come back for “another bite”.
We recently acted for a client whose former spouse made an application to the Family Law Courts for a division of property some 5 years after they agreed upon and carried out an informal property settlement. Our client had gone into considerable debt to “buy out” the former spouse’s interest in the former matrimonial home. While an informal property settlement had seemed like a good idea at the time, our client ultimately had no choice but to incur the cost and emotional strain of defending the application before the Family Law Courts. Had a formal property settlement been made at the time of separation, the situation would have been avoided entirely.
Please also be aware that there are also potential tax benefits to be gained from formalising your property settlement. So, if you are thinking it may be cheaper or easier to make an informal property settlement, we urge you to think again.
If you and your former spouse or partner have reached an agreement as to how to divide property between you, we can help you to make that agreement into Consent Orders or a Binding Financial Agreement to ensure that your agreement will be recognised as formal and final property settlement.
Further, we strongly recommend that all separating spouses and de facto partners receive at least basic family law advice as to their entitlements before negotiating a property settlement. We can provide you with this advice and, if you require, negotiate on your behalf to seek the best possible outcome.
If you wish to find out more about formalising property settlements in family law, please contact the authors.