24 Aug Financial Settlements without a lawyer
After separation some people may choose to divide their assets without a lawyer, and understandably they are commonly motivated to save money and avoid the litigious process. However, people can run into problems and they typically fall into one of two categories:
- People have an agreement between themselves and do not formalise it, so it is not binding.
If a separating couple has not formalised their settlement either by way of Consent Orders or a Binding Financial Agreement (a BFA),the financial ties with the former spouse have not been severed and there is always the risk of one person coming back for what’s often referred to as ‘a second bite of the cherry’. This is where people elect to contest the property settlement that had been agreed upon and often occurs when one person uses up their settlement and down the line returns seeking additional financial support including spousal maintenance, often many years later.
For many separating couples their key assets are the home, superannuation, vehicles and house contents. They will often make an agreement between themselves to sell the home to pay off the mortgage and then split the proceeds from the sale of the home, each keeps their own super and cars and they divide the contents between them. This seemingly straightforward division can become problematic because the division may not really be appropriate based on their circumstances. One person may not be aware of what they are entitled to. It will be affected by many factors including, for example, a 50-50 split may seem fair initially but might not be adequate if, for example, one person has been at home raising children while the other has stayed in the workforce, developed their skills and increased their earning capacity.
Sometimes, parties will realise that the settlement they agreed to at some stage in the past, is well below their entitlement. It may be that by that time, their former spouse has exhausted their share of the agreed settlement and come back seeking additional funds, or their former spouse has not honoured the terms of their agreement reached between them.
It is not uncommon to see people that have remained separated for many years but are not divorced. If this is the case, if one party wishes to, they have the right to bring an application to the Court to contest the original informal settlement up until 12 months after the date of Divorce.
Parties also may not be aware of the various taxation consequences and exemptions that they may be entitled to where a division of property is completed with Consent Orders or a BFA. There are important ramifications as to Stamp Duty and Capital Gains Tax, for example where there is a transfer of real estate and no court order or BFA, then there is no opportunity for stamp duty relief or CGT rollover relief.
- People draft their own orders without legal advice.
Sometimes couples reach an agreement, and may draft the necessary documents, such as Consent Orders themselves, but without having any legal representation or advice.
The correct wording for Orders and appropriate considerations as to the effect of the Orders can be a complex and technical area of the law and often fraught with potential problems. If Orders are poorly drafted then not only may they not give effect to the arrangement that is contemplated by the parties but may give grounds for the Orders to be set aside in the future.
We will always encourage our clients to try to resolve their family law property division as amicably as possible and without recourse to defended litigation if at all possible. However, advice at an early stage from an experienced and expert Family Lawyer is essential to achieve the settlement and, importantly, to protect our clients from experiencing any further problems in the future. Unfortunately, it is not uncommon for us to see people who have divided their property with an informal verbal agreement themselves, but later having serious issues that require legal involvement and often then resulting in expensive and lengthy Court proceedings.
If you have any questions about reaching an agreement with your former spouse or any family law matter please contact the Family Law team at Solari and Stock Miranda on (02) 8525 2700 or click here to request an appointment.