The short answer: yes.
In the vast majority of cases, it is necessary and smart to decide how your assets, debts and superannuation are going to be dealt with when your relationship ends and to document this legally. This process is known as a ‘financial settlement’ or ‘property settlement’.
Here’s why you need a formal property settlement drawn up:
- You might need one to ‘buy out’ your ex’s share of joint property and avoid stamp duty
This will involve changing the legal title to the property. Formal documents are required to do this, especially if there is a mortgage and banks involved.
If you are changing the legal title of a property – for example, from joint names to sole names or transferring a house from one spouse to the other – then you can access a saving on your stamp duty by making sure the transaction is recorded in a Consent Order or a Binding Financial Agreement.
If you are selling a joint asset as part of a property settlement, you may also be eligible for a discount on your stamp duty for your next solo property purchase. Again, you need to have had the sale of the relationship asset legally recorded to access this concession.
- You don’t want to ‘leave the door open’ and risk your ex making a claim against your assets in future
The event of separation, and even a formal divorce, do not terminate the financial relationship between married couples or de factos. This may still be the case, even if you did not combine finances when you were together.
Imagine if you hadn’t had a financial settlement and then you got an inheritance, or won the lottery, shortly after your break-up. It may be a sticky problem for you if your ex decides to make a claim on those windfalls. Or, imagine that you’re living in the joint property by agreement with your ex, and you have an agreed plan to buy them out at some point in future, but then the property market boomed suddenly and the value of your house increased significantly?
Delaying, or failing to do a formal financial settlement in these scenarios could really hurt your hip pocket.
In all situations, unexpected events can really mess with your future plans and financial security post-separation.
The most sure-fire way of protecting your assets – those you had at the time of separation and those you accumulate afterwards – is to have a property settlement legally recorded as soon as possible after separating. A family lawyer can help you do all or part of this process.
- You may be exposed to debts incurred by your spouse after separation
If you have joint liabilities like home loans, credit cards or interest-free finance contracts – ask yourself what might happen if your ex decided to stop paying them?
These sorts of joint liabilities typically bind both parties despite a separation and regardless of whether you are still using the asset attached to them. Don’t leave yourself having to try and put the toothpaste back in the tube. Undertaking a financial settlement which allocates responsibility for joint and individual debts, and releases you formally, is an important way to minimise your exposure to risk.
- You might miss your chance to receive your entitlements
There are time limits which apply to making a claim under the Family Law Act for a financial or property settlement. If you have been married, or been in a de facto relationship, it is worth consulting a family lawyer to find out what your entitlements are. If unsure about whether your relationship is classed as de facto, check out our blog here.
If you miss the deadline to obtain a property settlement, you may have to get leave from the Court to make your claim. This can create delay, expense and uncertainty.
- You can make sure agreements are kept and are enforceable
Separations often come with distrust – it’s a big deal to count on your ex to do what they say they will! Even the most amicable separations can come unstuck when plans do not pan out as you thought they would.
A Consent Order of Binding Financial Agreement can ensure that you have a way of ensuring your agreement is enforceable.
Even if it seems simplest to ‘walk away’ with what you each have, or maybe just sell everything and divide the money – this won’t end the rights each person has under the Family Law Act to make a claim for a division of property in future. Don’t take the risk – get some advice and protect yourself from this possibility.
Our family law experts can help you to draw up your financial settlement if it’s already agreed – or we can advise you about your property settlement entitlements (and even negotiate it for you!).
We offer tailored assistance to meet your needs and budget. Should you prefer to ‘DIY’ your property settlement, we can provide piecemeal advice and guidance at key stages and prepare Consent Orders and Binding Financial Agreements once you have a deal in place. We can review your draft settlement documents to make sure they are fool-proof and work the way you want them to. If you’d rather outsource the whole process, we can guide you through the entire process from beginning to end and advocate on your behalf to achieve the best outcome for your situation.
To find out which option suits you best and get started on your financial settlement today, contact the straight-talking team at Parker Coles Curtis for a free 15-minute, no-obligation discussion here.
