Property division is critical after a marriage or de facto relationship ends. Understanding the options will help ensure that each party exits the relationship with a fair entitlement.
In this article, we’ll look at how you can divide property and which option may be best for you.
What is property settlement?
A property settlement divides property and financial resources between parties following a divorce or de facto relationship breakdown. This process is governed by the Family Law Act 1975. Certain issues aren’t covered by a property settlement, such as child support, managed through a separate process.
How do you divide property and financial resources?
There are four ways to divide property:
- Informal agreement;
- Binding financial agreement;
- Financial consent order;
- Financial court order.
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Informal agreement
An informal financial agreement in Australian family law is a private arrangement between parties to divide assets and liabilities after a relationship ends. It’s not legally binding or enforceable by a court. These agreements are made without court involvement, often without legal advice.
They can be risky, as there is limited opportunity for justice if one party breaches the agreement. Informal agreements may not consider all legal entitlements, potentially leading to unfair outcomes. It’s advisable to seek legal advice before entering into such agreements.
Binding financial agreement
In Australian family law, a Binding Financial Agreement (BFA) is a legally binding contract between couples about property and finances. BFAs can be made before, during, or after a relationship or marriage. They outline how assets, liabilities, and financial resources will be divided upon relationship breakdown. BFAs provide certainty and avoid court involvement but must meet strict legal requirements.
Legal Requirements
A BFA must satisfy certain legal requirements to be valid.
- The BFA must be in writing.
- It must identify the parties involved in the agreement.
- Both parties must receive independent legal advice before signing the agreement. This advice must cover the agreement’s effect on the party’s rights. It must also go over the advantages and disadvantages of the party making the agreement.
- A certificate from the lawyers stating that independent legal advice was provided must be included.
Financial consent orders
Financial consent orders are legally binding court orders. They cover property division after a relationship ends by agreement between the parties. Parties must submit a proposed division to the Family Court for approval.
The Court ensures the agreement is just and equitable before granting orders. They can be made without going to court, saving time and legal costs. Once created, consent orders are difficult to overturn.
The Court determines if a submission is just and equitable through a four-step process.
4-step process
The four-step process is as follows:
- Determine the full range of assets, personal debts and other liabilities and financial resources of both parties.
- Assess contributions by each party. These may include direct and indirect financial contributions. They may also be non-financial contributions to the home and welfare of the family.
- Consider factors like age, health, financial resources, care of children, and earning capacity to assess the financial support needed.
- The Court decides if the proposed division of assets and liabilities is just and equitable for both parties.
Court orders
If you and your former partner can’t agree on your financial arrangements, you may apply to the Court to resolve them. The applicant must complete pre-action procedures before making their application.
Pre-action procedures
The pre-action procedures involve three steps:
- The parties must undergo family dispute resolution with a mediator to determine if an agreement is possible.
- If you cannot resolve this, write to your ex-partner detailing your claim and any possibilities for settlement.
- Disclose your financial situation to the fullest extent possible.
Once the pre-action procedures are complete, you will receive a Genuine Steps Certificate.
Submitting an application
Once you’re ready to apply, you must pay the relevant fee and file the following:
- This application tells the Court what orders you are requesting.
- This document sets out your financial position.
- This form lets a party detail their contributions to the relationship and future needs.
- This certificate proves the applicant completed the mandatory pre-action procedures.
Conclusion
You should understand your options and the processes involved when organising financial agreements. Both informal and legally binding alternatives are possible. Whichever you feel is appropriate, it’s best to make financial arrangements by agreement. If agreement isn’t possible, the Court can help settle matters through a property settlement.
Regardless of your option, you should always seek legal advice to protect your assets. Please feel free to contact us to arrange a free consultation.
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