Marriage & de facto relationship property rights following a relationship breakdown need to be dealt with as soon as possible. Understanding the processes that you need to undertake and the risks of not putting a property settlement agreement immediately in place can seriously undermine any future positions you think you may have.
If you have managed to reach a property settlement agreement, you must document it. Not doing so, can expose you to unnecessary risk of having any verbal agreements ignored or challenged as circumstances change. An excellent place to start any agreement is to understand clearly how a Court decides on property orders and then determine your position according to your needs.
Property Settlement Agreement – A Four Step Process
Through experience, Calvin Nelson has a four step process in assessing a marriage or de facto relationship property settlement. This process aligned with property orders that a court may decide. Our objective is that you come to an appropriate and amicable arrangement without having to go through the difficulties of the courts.
Step 1: Ascertaining the Pool
All assets must be taken into account, whether they are acquired before or during the relationship or after the separation. Assets include real estate, shares, cars, jewellery, savings, furniture and effects. Superannuation is taken into account, and it may be split when a property settlement is made. We also consider the financial resources of the parties.
Step 2: Contributions to the Net Asset Pool
We assess each party’s contribution to the relationship:
- Financial and non-financial, and
- As a Homemaker or Parent.
- Initial contributions (what you bring into the relationship) are relevant, as are gifts and inheritances.
Step 3: Future Needs
We assess the future needs of both parties, having regard to factors which include:
- earning capacity
- the assets of each party
- care or support of children
Step 4: Justice
The final step is the practical effect, to achieve a result which is just and equitable.
When you reach an agreement, there are two ways of formalising the agreement:
- Consent Orders filed at Court. You are not required to attend Court.
- Making a Binding Financial Agreement (Contract).
To achieve an outcome each party has an obligation to make a full and frank disclosure of their financial circumstances.
Document Your Property Settlement Agreement
If you are thinking of not documenting your property settlement in a legally binding way you are leaving yourself open to risk.
It is a common situation – you’ve managed to reach agreement on how you’re going to divide your assets, you’re happy with it, the other party is happy, you don’t want to rock the boat, you don’t want to upset the other party and you want to keep it amicable.
Sorry but things change. People regret decisions.
- People hear from others that they ‘should have got more’ or are entitled to more.
- Financial circumstances change and people sometimes then feel they need access to more money or property.
- People re-partner and new partners, relatives, friends and neighbours, will often have something to say about your property settlement and may try to influence what has been agreed.
Any one of these things, could have you facing a situation where your (ex)partner decides later to change your “informal” verbal property settlement agreement.
People on the friendliest of terms will still look after themselves first. If they think their financial circumstances need it and they know the property settlement agreement reached is not legally binding, then they may want more later.
The best time to get your former partner to agree to make the property settlement you have reached final, binding and enforceable, is when you:
- Both have just decided on how the property will be divided;
- Are still on reasonable terms.
If you both are prepared to make the property settlement you have agreed to final, then it should be easy to get your agreement into either Consent Orders or a Binding Financial Agreement. If your former spouse doesn’t want to have Consent Orders or a Binding Financial Agreement, then you may want to ask why not – are they hiding something or hedging their bets to keep options open for the future.
If you reach agreement but want to keep things informal (without Consent Orders or a Binding Financial Agreement), you can be taking a big risk. If you agree, why not put it in writing and have it legally enforceable. Ensure that there will never be any misunderstanding or attempt by one person to change an agreement if their circumstances change.
It would be nice to be able to rely on your former spouse’s word, but you are no longer together and the only thing you can have complete trust in, in relation to something as serious as your property and financial future, is a Court Order.
You must also remember that if your property settlement agreement is not legally documented you will not be able to:
- Avoid paying stamp duty on the transfer of a house, land or unit; or
- Use Capital Gains Tax Rollover relief provisions.
For a no obligation and confidential discussion please contact Calvin Nelson at any one of our offices in Auburn, Ermington or Pennant Hills.