Understanding the division of assets in divorce or ending a de facto relationship is critical. You can protect your entitlements to the asset pool and possibly financial support.
This article will review the common concerns, solutions, and strategies on how to split assets fairly and legally in a divorce. It will explore the split of assets and how it is typically handled in family court proceedings.
In This Article
What is the role of the Family Law Act?
What can a property settlement include?
What is a binding financial agreement?
What is a financial consent order?
What is a financial order?
What is an informal property agreement?
What Is the Role of the Family Law Act?
The Family Law Act 1975 establishes the rules for legally binding financial arrangements. The law sets the time limit for dealing with financial matters. It states that married couples must finalise financial proceedings within a year of divorcing. De facto couples must create a settlement within two years of separation.
The Family Law Act also defines the role of the Family Court, particularly in creating financial orders.
What Can Be Included in the Split of Assets during Divorce?
Property settlements can include all the assets and liabilities in a relationship. These may include:
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Personal debts
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Personal property such as jewellery
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Furniture
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Superannuation
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Bank accounts
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Stock portfolios
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Real estate.
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What Is a Binding Financial Agreement?
A binding financial agreement (BFA) is a private legal document between a couple. It stipulates how their property settlement and financial resources will be divided after a relationship breakdown. It can also cover spousal maintenance.
Following a 2009 amendment to the Family Law Act, BFAs can now cover separating de facto couples. BFAs offer various benefits.
A financial agreement can be entered into at any time. You can create one before a relationship, during the relationship, or after a relationship breakdown. This is in contrast to financial court orders which can only be sought after a relationship has ended.
Binding financial agreements are flexible. They can cover an entire marital pool or only certain asset division. They also don’t need to satisfy the Court’s four-step process for assessing financial orders.
Legal requirements
BFAs must meet certain requirements to be legally binding. Both parties must satisfy the following:
Receive independent legal advice.
Enter the agreement free of coercion or duress.
Fully disclose their finances.
Commence the agreement within the deadline set by the Family Law Act:
Within 12 months of a divorce’s finalisation.
Within two years of a de facto relationship breaking down.
Common concerns
Clients may have several concerns when entering a BFA. Some common concerns include:
One of the main concerns is whether the agreement will be upheld in Court. A BFA must comply with specific legal requirements under the Family Law Act 1975 for it to be legally binding. The Court may set aside the agreement if these requirements are unmet.
Both parties must fully disclose their financial circumstances. Failure to do so can lead to the agreement being set aside.
If one party is pressured into signing the agreement or if the terms are highly unfair to one party, the agreement may be considered void.
Drafting a BFA can be complex and costly. It requires specialised legal advice and potentially leads to lengthy negotiations.
Solutions
Here are ways you can approach these issues:
Engage a competent family lawyer to draft or review the agreement to ensure it meets all legal requirements.
Both parties should fully disclose financial documents, including asset division, liabilities, and income. If you suspect your former partner is hiding assets, a forensic accountant can help track them down.
Consider mediation or negotiation to resolve issues without court intervention if disputes arise.
If you cannot afford the cost of a BFA, a consent order is generally more straightforward and cheaper.
We recommend checking out this blog to ensure that you choose the right family lawyer for your needs.
What Is a Financial Consent Order?
Financial Consent Orders are orders made by the Court. They have the same legal effect a judge makes after a court hearing. However, they are based on the mutual agreement of both parties. This means consent orders can be granted without needing to attend court.
A four-step process in the Family Law Act governs consent orders.
1. Identify the marital asset pool’s net value
Both parties must fully disclose their finances. Disclosure includes providing information on all assets and liabilities. These could include:
Bank accounts
Stock portfolios
Credit card debts
Loans
Real estate
Personal effects
Superannuation
If you’re including superannuation interests in the property settlement division, there’s a separate process to complete. Even if you don’t intend to include superannuation in the settlement, it should still be disclosed.
Before splitting superannuation, you need to get an accurate valuation of the interest. Superannuation splitting legislation sets out how super interests are to be valued. You need certain information from the superannuation trustee to get a valuation. You can obtain this information by filling out the following forms:
The Form 6 Declaration can be found in the Superannuation Information Kit. This form ensures that you are permitted to receive the relevant information.
The Superannuation Information Request form officially applies to the trustee to provide the necessary information for valuation.
Typically, the information provided by the trustee is sufficient to obtain an accurate valuation. However, complex super interests may require expert assistance. Seek legal advice if this is the case.
Inform the trustee about the orders you’re seeking and seek legal advice to ensure compliance. The trustee must have the opportunity to object to the orders if they choose to. This is part of providing the trustee with ‘procedural fairness’. Give a sealed copy of the application to the trustee immediately after applying. The trustee must receive written notice of the orders sought at least 28 days before the court hearing. Once the order is made, provide a copy to the trustee.
Asset pool manipulation
While parties may agree to a settlement, it’s still possible that one party may seek an advantage. A marital pool can be manipulated in different ways.
A spouse may temporarily give certain assets to a close associate to remove them from consideration.
The marital pool may get depleted deliberately through reckless spending or gambling.
A party could invest in unique items such as art or collectibles which makes valuing the property settlement pool difficult.
If you suspect any financial tampering, work with a lawyer and a forensic accountant to account for any foul play.
2. Assess the contributions of each party
When dividing assets, the Court will account for the contributions of each party. Financial contributions typically come in the form of a salary or other income. Non-financial contributions can include homemaking, child care and renovations to the house.
3. Consider the future needs of each party
A divorce often disadvantages one party over the other, frequently occurring when one spouse sacrificed a career to tend to the family. This results in losing out on work experience and potential for career progression. The family court wants to balance the needs of each spouse by considering their financial future. Some factors include each party’s:
Age and health.
Access to financial resources.
Future earning capacity.
Caring responsibilities.
4. Ensure the settlement is just and equitable
The Court will make a final assessment of the order’s fairness. If it finds that the proposed settlement isn’t just, it may make further adjustments based on the previous steps.
Common concerns
Many misconceptions about financial consent orders can cause concern for many people. Some common issues people have include:
A common concern is the belief that if one party doesn’t make direct financial contributions (for example, not working or earning less), they will receive a lesser share.
People often overlook the importance of future needs, such as the care of children, health issues, or the capacity to earn income. These considerations can significantly impact the settlement.
Obtaining a Financial Consent Order can be seen as costly and complex. This can deter some from pursuing it.
Solutions
The Court doesn’t only consider financial contributions. Non-financial contributions are also critical. These can include homemaking, child care and home improvements.
The Court will take a holistic view of your current and future financial benefit situation. Ensure the Court understands your future earning capacity, caring responsibilities, and health-related concerns.
Many people that believe involving the Court will lead to increased costs and case complexity. However, streamlined application processes generally decrease costs. Simplified application forms also make the process easier to complete.
What Is a Financial Order?
Financial orders may be necessary if you and your ex-partner can’t agree on how to split your assets. The court’s involvement and decision-making are essential in these cases. Property orders can be more adversarial and involve more extensive court proceedings.
Financial orders begin with an Initiating Application. Parties are required to undergo dispute resolution to attempt to negotiate an agreement. This pre-action procedure is called taking ‘genuine steps’ to find common ground. Once this action has been completed, you’ll receive a genuine steps certificate that you can use to proceed with an application. The applicant may be exempt from pre-action procedures if there are allegations of family violence and it would be unsafe to proceed.
Once you’ve completed the application and submitted it to the Court, you need to serve them on the respondent. The forms that must be served are the following:
Initiating application
Genuine steps certificate
Financial statement
Financial questionnaire
The respondent has a right to file a response to the application. The respondent can consent to the orders sought, ask the Court to make a different order or dismiss the application.
Court hearing
Parties need to participate in a final hearing before the Court will make the financial order. It’s important to be prepared for the hearing to ensure you receive a fair entitlement.
Before the hearing, file your evidence in chief with the Court as an affidavit. Evidence in chief should contain all the information a party wants the Court to consider at the hearing. When presenting their case, each party can do the following:
Make an opening statement summarising the case.
Cross-examine the other party and witnesses to challenge the presented evidence.
Make a final submission about the case’s evidence and the law.
How to perform a cross-examination
Being able to cross-examine effectively helps your case greatly. Here some tips to get the most out of your cross-examinations.
Prepare questions that highlight weaknesses in the other party’s case or contradictions in the affidavits. Some example questions are:
Why did you withdraw this amount of money on this date?
Can you explain these unusually large expenses in your financial resources records?
How would you describe your contribution to maintaining the household?
Why did you sell/transfer this asset to this third party?
If you have evidence that the other party’s sworn statements are incorrect, put that evidence to them. If you don’t question them about it, you cannot use that evidence.
Write down all the points you want to bring up. This will help you ensure that you make your case fully.
You are permitted to ask leading questions, in which the question suggests the answer. An example could be: “You were engaging in online gambling, weren’t you?”
Make sure none of your questions are offensive or abusive.
Don’t ask questions repeatedly in the hope of getting a different answer.
After a cross-examination, parties have the right to re-examine their witness to clarify any issues that were raised. The witness can’t introduce new evidence at this point.
Common concerns
- Court proceedings can take significant time, often months or years, to resolve. This can prolong the stress and uncertainty for the parties involved.
- Litigation can be emotionally draining and stressful, particularly in matters related to personal relationships and finances.
- When a matter goes to Court, the decision is in the hands of a judge. This can result in unpredictable outcomes that may not align with either party’s expectations or desires.
Solutions
- Engaging a skilled family law attorney can help navigate the complexities of the legal process. They provide advice on likely outcomes and represent interests effectively in Court.
- Being well-prepared and organised with all necessary documentation can streamline the process and reduce costs.
- Even in Court, being open to settlement can lead to a more controlled and satisfactory resolution for both parties.
- Counselling or support groups can help manage the emotional stress associated with court proceedings.
What Is an Informal Property Agreement?
Property can be divided in a divorce informally. These agreements are outside the scope of the Family Law Act. This arrangement may seem attractive for several reasons. It offers more flexibility than a legally binding option.
There’s no strict time limit for creating the agreement. It’s also initially cheaper to organise a financial settlement without the supervision of a lawyer or the Family Court.
Preparing an informal agreement
It’s crucial to approach an informal agreement carefully to give it the best chance of working.
Communication
There must be open and civil communication between the parties. If you can’t trust your former partner to negotiate in good faith, an informal agreement won’t be possible.
Compromise
Both parties must be willing to compromise. Understand the other party’s position and needs.
Draft the agreement
The agreement should be in writing and a copy provided to both parties. Keep the wording simple and clear. There mustn’t be any room for alternative interpretations.
Independent legal advice
Both parties would benefit from expert legal advice. It may seem like an unnecessary expense, but property settlements can be more complicated than people realise. An experienced family lawyer can help you ensure the agreement is fair.
Common concerns
Informal agreements are not legally binding. This can be a problem if one party does not adhere to the agreed terms.
Without legal guidance, parties might not split assets and debts fairly or in a way that considers future needs and changes in circumstances.
Since the agreement is not legally binding, either party can make future financial claims against the other. This potentially leads to ongoing legal disputes.
Solutions
Convert the informal agreement into a binding financial agreement or consent order. This provides legal enforceability and clarity.
Engage professionals to accurately value assets, including real estate, businesses, and superannuation funds.
Ensure the agreement is detailed and in writing. Outline all aspects of the asset division, responsibilities, and other relevant factors.
Conclusion
The legal processes behind dividing property are vital parts of divorce. Several options are available for the splitting of assets during divorce and ending a financial relationship. Each has legal requirements and applies to various stages of a relationship.
It’s vital to seek legal advice before entering any legal proceeding.
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