Why you should resolve the division of property by way of Court Orders or Binding Financial Agreement as soon as possible after separation
If you have recently separated from your spouse/partner, you may think that it is not necessary to finalise the division of property formally, such as by way of Court Orders or by way of Agreement signed by the parties and their solicitors.
Some reasons for not formalising property division are:
- Not wanting to spend money on solicitors;
- There wasn’t a big enough asset pool to warrant formal documents;
- They are too busy and couldn’t find the time;
- The parties are amicable so there is no need for solicitors to be involved.
Are you aware that if you do not formalise/finalise the division of property after separating with your partner/spouse, you could run into the following problems:
- The values of the assets and liabilities of a relationship are valued as at the date of the settlement, not at the date of separation. If you and your partner/spouse separated in 2010 but did not obtain Court Orders nor enter into an Agreement for the division of property, then either party may be able to make an Application to the Court seeking Orders that the assets and liabilities as they are valued at the current date, be divided between the parties (*time limits of such an application are up to 12 months after the date of divorce for parties who are married or 24 months after the date of separation for de facto partners. Leave of the Court needs to be sought if an application is brought after time). If, for example, you are looking at retaining the family home as part of your entitlements to settlement, the value of the property could have increased between separation and settlement and as a result you would have to pay the other party more money to buy out their interest in the family home.
- Financial circumstances may have changed since separation: If one party wins the lottery or receives an inheritance post-separation, those monies may be included as part of the asset pool available for distribution between the parties, even though those monies were received after separation. One party may have lost their job and can no longer provide for themselves after separation, which is a factor to be taken into account when deciding how the property is to be divided and whether spousal maintenance applies.
- Post-separation spending cannot be “notionally added back” into the pool: If one party’s living expenses are higher than the other party’s expenses, what has been spent would not be added back into the pool of assets available for distribution. Also, if one party refuses to make the mortgage re-payments and the other party has to make the mortgage re-payments on their own, that party who made the payments would not be entitled to a reimbursement of what he/she has spent since separation.
- Both parties have agreed to separate their assets without entering into a formal Agreement or Consent Orders with the Court and one party changes their mind after the assets have been divided – either party may still apply to the Court seeking Orders for a “just and equitable” division of the assets.
Contact us if you have separated and have not formalised the division of assets between yourself and your spouse/partner and we will be able to provide you with advice as to what you should do to protect your assets.
This article provides information that is general in nature and is not a substitute for legal advice.