The 4 Biggest Risks of Not Formalising Your Family Law Property Settlement

A property settlement is the division of assets and liabilities following the breakdown of a marriage or the separation of a de facto relationship. See more about the 4-step process here: Four Steps to identify what you’re entitled to in a Family Law property division

Once an agreement has been reached as to the division of assets and liabilities, it can be formalised into an Application for Consent Orders or a Binding Financial Agreement.

These are the only two formats that can be upheld as being legally binding between parties as to the division of assets after separation pursuant to the Family Law Act.

Why You Need to Formalise Your Property Settlement

If you do not formalise your property division by way of an Application for Consent Orders or a Binding Financial Agreement, you will find yourself exposed to a number of high-risk situations that could affect your financial future.

‘Handshake’ Agreements Are Not Legally Binding

‘Handshake’ agreements do not provide security for your financial future, ‘Handshake’ agreements or agreements documented in any other format besides a Binding Financial Agreement or Consent Orders are not considered legally binding pursuant to the Family Law Act. This means that your former spouse may promise you something, then withdraw that promise some time later, and you are unable to hold them to it as you have not documented the agreement correctly. You may plan your financial future based on that promise and find yourself in a difficult position if your former spouse changes their mind. Unless the agreement is documented in a formalised legally binding way, there is no way to enforce that agreement.

Informal Agreements Leave You Open to Future Claims

Informal settlements do not prevent an individual from having a ‘second bite of the cherry’ and seeking a formal settlement. Resolving matters informally does not rid of an individual’s right to seek a property settlement under the Family Law Act. Whilst you and your former spouse may agree to an informal division, your former spouse may then seek a formal settlement under the Family Law Act. This would, in essence, enable your spouse to have a ‘second bite of the cherry’ so to speak, given that an informal settlement is not considered legally binding.

Protecting Your Assets and Investments

Formality provides security for your investments moving forward. You will have peace of mind knowing that your financial future is secure. This means that you can make that financial investment, purchase a property with your new partner or buy the winning lotto ticket without concern that your former spouse could make a claim on those assets.

Avoid Paying Unnecessary Stamp Duty

Stamp Duty exemptions – if you are receiving the transfer of property to you (such as real estate or a motor vehicle), unless the transfer is documented in a Binding Financial Agreement or Consent Orders, you are not exempted from the payment of duty on the transfer.