The Family Law Act 1975 (the Act) provides two enforceable ways of formalising a property agreement after the breakdown of a marriage or de-facto relationship: Consent Orders (CO) or a Binding Financial Agreement (BFA). While it may seem easier or cheaper to simply divide what you have with your former partner, and go your separate ways, there are many benefits in formalising the agreement, and equally, many risks in not doing so.
Why should I?
Deciding on how to formalise your property settlement will depend on a range of factors: the complexity of your agreement, what is within the property pool, and what your pathway forward may look like.
Consent Orders are prepared with or without lawyers involved and are filed with the Court for a nominal filing fee. They can generally take from six-eight weeks to be reviewed by the Court. Once reviewed, the Court may approve them and issue you with sealed Consent Orders, or they may write asking for matters to be explained or parts of the proposed Consent Orders to be amended. The agreement the parties come to must fall within a permissible range of what is a just and equitable division of the pool as set out in the Act. Once issued, they are enforceable and binding upon the parties. They can only be set aside in very limited circumstances.
Binding Financial Agreements must be prepared where each party has had the benefit of prior independent legal advice and is an agreement that effectively seeks to deviate from the rights and protections under the Act. It is not reviewed by the Court like Consent Orders are, and it can be an agreement that does not fall within what a just and equitable division of the pool may look like. It must be precisely prepared, otherwise, it can be set aside for failure to comply with the strict requirements of the Act.
Both sets of documents, once completed and issued in final, have the benefit of:
Bringing your property dispute to a close with certainty. Unless a very limited set of circumstances apply, the agreement is final and prevents either party from seeking to make further claims against the other.
It is enforceable, meaning either party can seek the other to comply with the agreement, even if they decide they no longer want to, by way of Court enforcement mechanisms.
It can offer tax benefits, such as the transfer of some assets such as property and motor vehicles under a stamp duty exemption.
What if I don’t
While it is ultimately your decision whether you choose to formalise your agreement or not, you need to be aware of the risks of not formalising, including:
If your ex-partner decides not to comply with any of the terms of your agreement, you have little in the way of “enforcing” the agreement be complied with.
You cannot split superannuation entitlements.
You expose yourself to the risk of your ex-partner coming back for “more”, particularly if you have re-established yourself, such as buying further property, pooling assets and resources with a new partner, or paying down debts / paying a higher rate of superannuation.
They may be entitled to make a claim upon your estate and may continue to be considered a beneficiary.
If you intend to proceed with an informal property settlement, you should seek accounting, tax and estate law advice to properly inform yourself of the risks that this may expose you to. While it may seem like a convenient and cheap option, informal property settlements are likely to cause you more trouble down the track. To understand what may apply in your particular circumstances, contact our office at (02) 6225 7040 or info@rmfamilylaw.com.au.