An alarming number of people who’ve separated fail to formalise the agreement they reach as to the division of their property upon separation. By not entering into a formal agreement (separation agreements) and having just a verbal informal agreement, each party is at risk of their ex-spouse or ex-defacto claiming a greater share of property some time later – often years later!
It’s extremely important to formalise the property settlement agreement to make it final. I’ll explain in a moment what I mean by “formalise”… but before I do that, let me give you two real life examples which illustrate the point:
The parties separate;
They agree on a division of their assets, but do not formalise the agreement;
Over time, the assets owned by the husband increase in value while the assets owned by the wife decrease in value;
Several years after separation, the wife seeks Orders from the Family Court for her to receive part of the increase in value of the husband’s assets.
The parties separate with minimal assets, and do not enter into a formal property settlement agreement;
The husband, 18 months later, receives a lump sum injury compensation payment;
The wife commences proceedings in the Family Court seeking Orders that the husband make a payment to her from the lump sum amount received by the husband.
In Example 1, the matter settled with the wife receiving further assets from the husband.
In Example 2, the matter settled with the wife receiving a modest payment.
Both situations could have been avoided by having a formal property settlement at the time of separation.
Property settlements can be formalised by entering into a Binding Financial Agreement or having the Court make Consent Orders. Binding Financial Agreements require each party to have independent legal advice. As regards Consent Orders, such Orders can be obtained by the parties themselves, but it’s always wise to obtain legal advice before entering into such an important document. In most cases, people like to have their lawyer involved in the process from start to finish, with their lawyer drafting the wording of the Consent Orders.
Lawyers will make sure that all aspects are covered and that the wording does not leave any “loopholes”.