Property matters are one of the big issues spouses need to sort out after a divorce, along with parenting arrangements and questions around how to split assets during divorce. The right property division goes a long way toward ensuring that parties can move on after the end of a marriage or de facto relationship. Dealing with financial matters can seem complicated. Our guide goes through what your options are and the common concerns with each of them. We’ll consider potential solutions and what to expect during property proceedings.
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In This Article
What Is the Role of the Family Law Act?
The Family Law Act gives you the rules that govern binding property 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 how to split assets during divorce
Property settlements can include all the assets and liabilities in a relationship. These may include:
Personal debts.
Personal property such as jewellery.
Furniture.
Superannuation.
Bank accounts.
Stock portfolios.
Investment properties.
All of these things must be included in your disclosure. That means tracking down bank statements and other documents that outline your individual circumstances.
Get ahead with our FREE Assessment to see if you’re ready for your property settlement.
What Is a Binding Financial Agreement?
A binding financial agreement (BFA) is a private arrangement. It is formed outside of the Court, but the Court may be called on to enforce it. BFAs can cover large marital pools with complex assets.
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 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 for it to be legally binding. BFAs can often be challenged because they didn’t meet some requirement.
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 have to fully disclose financial documents. If you think your former partner is hiding assets, get help from a forensic accountant.
Talk out your disputes with a mediator’s help. .
A consent order is generally more straightforward and cheaper.
We recommend checking out this blog about how to find the right family lawyer 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
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:
The Form 6 Declaration is in the Superannuation Information Kit. This form says that you’re 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.
Let the trustee know about the orders you’re seeking and get legal advice. 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 when determining how to split assets during divorce. 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. This often happens when one spouse sacrifices 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 for children or family members.
A person’s future needs could justify receiving financial support like spousal maintenance.
4. Ensure the settlement is just and equitable
The Court wants to be fair to both parties. If it finds problems, it may make 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 you need to contribute financially to a marriage. But the division will consider non-financial contributions as well.
People often overlook the importance of future needs. These can be impacted by a party’s health and age, as well as their earning capacity.
Anything that involves the Court is often seen as overly expensive and difficult. This can discourage people from getting a consent order.
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 and other concerns.
Many people that believe involving the Court will lead to increased costs and case complexity. However, getting your application right the first time can reduce costs.
What is a property order?
Some parties can’t agree on how a division should work. In that case, the Court will decide the settlement. These family law proceedings can be quite adversarial and expensive.
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 family law courts will make the financial order. It’s important to be prepared for the hearing to ensure you receive a fair entitlement.
File your evidence in chief with the Court as an affidavit. Evidence in chief contains all the information a party wants the Court to know about 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
Here are some tips to get the most out of your cross-examinations.
Prepare questions that highlight weaknesses in the other party’s case. 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?
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 over a year. The longer the matter takes, the higher the fees you can face.
Litigation of any kind can be stressful for everyone.
When a matter goes to Court, the decision is in the hands of a judge. This means that you may not get the result you were hoping for.
Solutions
A skilled family lawyer can be a big help. They can let you know what your options are and how to approach the legal process.
Get your documentation in order ahead of time. This will help you avoid delays and meet the family law system’s deadlines.
Just because you’re going through litigation, that doesn’t mean you can’t still make an agreement. Use mediation to find an asset division that suits both of you.
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 offers more flexibility than a court order.
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.
You may not split your assets in a way that’s fair. There isn’t a guarantee that the agreement will consider your future needs or contributions.
You’re going to be open to potential challenges in the future. Your ex-partner may choose to seek court proceedings to get a better outcome.
Solutions
Convert the informal agreement into a binding financial agreement or consent order. That way, it’ll be legally binding.
Engage professionals to accurately value assets. That could include business interests and superannuation funds.
Ensure the agreement is detailed and in writing. The agreement should cover your entire asset pool.
Conclusion
It’s vital to seek legal advice before entering any family law proceeding.
Don’t let legal issues stress you out. Contact us today for a free consultation.
