There are four methods of effecting a property settlement for married and de facto couples:
1. Informal Agreement
2. Consent Court Orders
3. Binding Financial Agreements
4. Court Orders after a contested Court Hearing
Informal Agreement
This occurs when you and your former spouse choose not to make formal legal arrangements to finalise your property affairs and instead settling on a “kitchen-table deal”.
Informal agreements are dangerous and provide no certainty. They are unenforceable in the Courts and will not protect your property if things go wrong. They may also create far-reaching unintended legal consequences such as impacting upon an inheritance. There may also be serious taxation consequences, particularly if you or your former spouse intends to keep the former matrimonial home.
Consent Court Orders
Consent Orders are agreements reached between you and your former spouse formalised into a Court document. Once signed by both parties, the Orders are forwarded to the Family Court for approval. Depending upon the nature of the agreement, additional financial material might also need to be filed with the Application.
In most cases you are not required to attend the Court for Consent Orders to be made. Consent Orders provide certainty and are enforceable in the Family Court.
Legal advice should always be sought before signing Consent Orders as they are legally binding and carry with them serious legal consequences.
Binding Financial Agreement
Binding Financial Agreements are types of deeds or contracts which set out the agreement reached about how your property and financial resources are to be distributed upon separation. They are signed by both former spouses and their respective lawyers. Copies are then exchanged and kept by each party.
There are particular requirements which must be contained within Binding Financial Agreements for them to be legally recognised. You need to obtain legal advice if you are considering this type of agreement.
Court Orders after a contested Court Hearing
These are Orders made by the Court after a formal hearing. Each party files an Application containing the Orders they seek and the dispute is set down for a formal hearing. Each party is usually represented by a solicitor and barrister.
There are few benefits to Court proceedings. You and your former spouse lose all control of the process and the outcome. A stranger (for example: a Judge, Magistrate or Federal Magistrate) will decide how your property is to be divided.
There is likely to be significant delay between the filing of the Court Application and the hearing. The hearing process, being adversarial in nature, is likely to exacerbate any existing issues between you and your former spouse and will probably cause new ones. The costs of Family Court proceedings are likely to be very significant.
Court Orders after a contested Court hearing are legally binding and serious consequences flow form contraventions (or breaches) of them.
How Property is Divided
Whether you and your former spouse negotiate a settlement of your property affairs or the Court is required to decide for you, the same four step process is used to determine a just and equitable distribution of property and financial resources:
| Step 1: |
What are the nett assets? These includes such items as houses, cars, investments, money, funds in bank accounts, personal property, businesses, trusts, superannuation and the like.
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| Step 2: |
What contributions has each of the parties made to the relationship? Contributions include financial contributions (for example: any real estate, money, gifts, inheritances, trusts and property brought by either party to the relationship before and during the relationship); and non-financial contributions (for example: contributions made as parent and homemaker).
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| Step 3: |
Are any adjustments of property required to provide for the future needs of each party? Consideration is given to issues such as: with whom will any children of the relationship live with; the age and health of each party and the income-earning capacity of each party.
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| Step 4: |
Is the outcome just and equitable? At the end of this process an assessment must be made as to whether the proposed division of assets is just and equitable or fair in the circumstances.
The vast majority of property matters are achieved by negotiated settlement. Even in those matters where Court proceedings are commenced, most are settled before a formal Court hearing occurs. |
Since 1 March 2009 the way property is divided between separating de-facto couples in New South Wales has changed dramatically. In many cases people in de facto relationships will have the same rights as married couples when determining property settlement matters and the above process is also applicable to separating de facto couples.