The Secret To A Property Settlement Agreement In Australia
by Brampton Keats | 5 min read
Are you looking for a better alternative to the traditional time-consuming and expensive route to property settlements?
Most couples dread property settlements – they are usually long and expensive. However, there are smarter, quicker, more cost-effective alternatives if you know where to look.
Your actual goal is simple – to protect your future with a legally binding property settlement agreement. Whether your get the courts to impose a settlement on you and your ex-partner, or you arrange one privately, the result is the same – a legally enforceable property settlement agreement. It is how to accomplish that goal that most people find tricky. The big mistake couples make when considering a property settlement is to immediately consult lawyers from the outset of their separation. This is the slow, stressful and expensive way to achieve a property settlement.
Unfortunately, due to people’s lack of knowledge regarding their options, plus the way the legal profession is designed to make money, people often choose the wrong path. We hope that by the end of this article, you have a clear picture of what your property settlement options are, and what the best path is for you to take. In order to do that we will first need to talk about the property settlement process in Australia.
Am I Entitled To A Property Settlement Agreement?
You are entitled to a property settlement agreement if you are from a marriage or a de facto relationship.
Regarding marriages – the definition is self explanatory.
Regarding de facto relationships, the definition of a de facto relationship is a little more vague. The general definition of a de facto relationship in Australia is when two partners are living (or have lived) together on a “genuine domestic basis”. You can be from the same or opposite sex and must not be married or related to each other. If you aren’t sure whether you are in a de facto relationship or not, you will find our article on what constitutes a de facto relationship helpful. (Note: In Western Australia, the Family Law Act 1975 does not apply to de facto relationships). However, if you are in a de facto relationship in NSW, QLD, NT, ACT, SA, Victoria or Tasmania, the Family Law Act (and hence this article) will apply to you.
NB. As we don’t know whether you are from a marriage or de facto relationship, we will refer to your spouse as “your partner”.
When Can I Get A Property Settlement Agreement?
You can finalise a property settlement agreement as soon as you and your former partner have decided to separate. You can be living under the same roof – but still be considered ‘legally separated’. In other words, to be regarded as ‘legally separated’, you do not necessarily have to be ‘physically’ separated.
Regarding deadlines to making property settlements – the Family Law Act imposes the following:
- If you are married – you have 12 months after your divorce to make an application for your property settlement.
- If you are in a de facto relationship – you have 24 months from the date of separation to finalise your property settlement.
Do I Have To Be Divorced First?
No. Married couples do not have to be divorced to agree and finalise a property settlement.
If you are filing for a divorce, you don’t have to wait the 12 months required for a divorce and can finalise your property settlement as soon as you have decided to separate. This means that before your divorce is officially finalised, you can secure your financial future with a property settlement and thus move on with your life.
It is actually recommended that you sort out arrangements as soon as possible. This is because asset values can change over time and valuations are best done nearest to when you and your partner separate.
What Can Be Divided?
Anything that is defined as “property” by the Family Court can be divided. “Property” includes both assets and liabilities. They can be owned by you and your partner personally, in joint names or by a family trust or company.
Property can include such items as:
- Real estate – your family home or investment properties
- Shares and bonds
- Motor vehicles
- Any savings held in bank accounts
- Superannuation entitlements
- Household contents and personal effects
- Interest of a partner in a partnership
- Trust assets
- Long service leave entitlements
A couple of important points:
The Family Court’s definition of what constitutes property is quite broad. It doesn’t matter who bought the item, whose name it is under, and who incurred the debt. Furthermore, any property settlement agreement requires both parties to make a complete and honest disclosure of their financial circumstances. Failure to do this can result in severe consequences.
How To Work Out What % Of Property Each Party Gets
The following 4-step process is the most common way to calculate what percentage of property you and your partner get – it is what both lawyers and courts use in Australia.
- Calculate the total value of you and your partner’s net assets.
- Assess the contributions both parties made to this asset pool. Note: this includes non-financial contributions such as being a homemaker or parent.
- Determine the future financial needs for the both of you. This takes into account numerous factors such as; earning capacity, age, support for children (if any), health and the financial circumstances of any new relationships either of you may be in.
- The final step is to consider the fairness of the proposed property settlement. You want to achieve a result which is both fair and equitable for both of you.
Are Debts Classified As Property?
Yes. As mentioned above – your debts are also classified as property. So in addition to calculating the division of your property, decide who is going to pay off what debts.
How Do We Value Our Property?
The following are some recommendations on how to value your property.
- For real estate – you can organise an independent, certified valuer to calculate the market-value of your real estate. Another approach is to get valuations from 3 or more real estate agents. Then take the average of the estimates as your valuation. (Just make sure to ask them what they actually think the house will sell for).
- For any bank accounts or superannuation – bank balance printouts are the obvious way.
- For any motor vehicles or any personal/household property – viewing your model on website marketplaces (Carsales, eBay etc.) can give you a fair valuation.
- For any businesses – if you can’t agree on a price, you can hire a licensed business valuer.
What Are My Property Settlement Options In Australia?
Your goal is simple – to protect your future with a legally binding property settlement. In order to achieve that, you have typically 4 paths:
- Court-Imposed Settlement
- Consent Order
- Binding Financial Agreement Prepared Entirely By Independent Lawyers
- Binding Financial Agreement Prepared By Yourselves, Checked And Verified By Independent Lawyers
All of these 4 options above are recognised by the Family Law Act. As such, they are all legally binding under Australian legislation and achieve the same goal of protecting your future.
However with regards to your own cost, time and stress – these 4 options differ radically. We will now discuss and evaluate each option.
Option 1: Court-Imposed Settlement
It should be obvious that this is worst-case scenario.
Even the Federal Circuit Court / Family Court’s own website says the following:
“Why settle without going to court? It saves you time and money if you can reach agreement between yourselves. You also know exactly what each of you will get, whereas there is uncertainty waiting for a judicial officer to decide for you. Additionally, long court proceedings can increase stress and add to the pressure that you and your family are under.”
A court-imposed settlement is costly, time-consuming, complex and stressful. It should be obvious that it is an absolute last resort, only if you cannot reach a property settlement agreement with your former partner. If you need to make an application – if must usually be made within 12 months of your divorce becoming final. The decision is subsequently made through a court hearing.
Option 2: Consent Orders
Consent orders are written agreements that are formalised and then approved by a court.
Consent orders can deal with the following:
- The sale or transfer of property
- Spousal maintenance
- Division of superannuation
You can apply for a consent order to be made without going to court. Before your consent order is approved, the court has to first be satisfied that the consent order is properly drafted and that the terms of the agreement are “just and equitable”. As such, note that it still requires an application process and the court’s approval.
Option 3: Binding Financial Agreement Prepared Entirely By Lawyers
***When we refer to Binding Financial Agreements, we are also referring to Separation Agreements. They mean the exact same thing.
As mentioned above – the Family Law Act recognises Consent Orders and Binding Financial Agreements as the main avenues to a property settlement.
There are a few differences between a consent order and a binding financial agreement:
- Consent Orders have to be made by a Court. If the Court doesn’t deem your agreement “just and equitable”, it will not grant it. On the other hand, with Binding Financial Agreements – the final decision rests upon you and your former partner.
- Consent Orders have to be filed with a Court, whereas a Binding Financial Agreement does not need to be filed or registered anywhere.
- A Binding Financial Agreement can be finalised in a more private manner, though it is a requirement to get independent legal advice.
If you decide to go down the binding financial agreement route, you have essentially 2 options:
- See independent lawyers from the get-go and have them to prepare a binding financial agreement entirely by themselves
- Prepare the agreement yourselves using a professional template, and then have it proof-read and verified by independent lawyers
Why Beginning With Lawyers Is A Mistake
If you book an appointment and see lawyers from the get-go without any preparation, you are wasting your time and money. You will have to see them at some point, but that is best left once you have prepared everything yourselves.
Here is an example of the wrong path to take:
- Research and decide upon separate lawyers
- Have an initial lawyer appointment
- Followed by several lawyer discovery meetings (asset/debt breakdown, future expenses etc.)
- Followed by several lawyer negotiation meetings
- Followed by further lawyer negotiations and possible court interventions
- On the basis of the information you have provided, the lawyer then completes their own template
- Lawyer signs Independent Solicitor Certificate to finalise agreement and make it binding
It is a complicated, costly and long-winded process. Something that should have taken a short time to complete is now drawn out for months and months. And lawyers, especially family lawyers are expensive. The longer the process draws out, the more billable hours you have to pay and the more stressful everything becomes because you cannot move on with your life. (And if it ends up in the courts, this only add to the stress and costs).
For most couples, it is completely unnecessary.
Furthermore, because the process by its very nature is adversarial, couples usually end up hiding ‘behind’ their lawyers. We found that no matter how amicable things may have initially begun, the minute lawyers get involved in separations, things often turn adversarial – especially if one lawyer has more influence than the other. In addition, by leaving your future in the hands of a 3rd party, you have given up control of your situation much too soon.
However, people, out of their fear for certainty, will do this. This fear is a costly mistake. Or someone might say “I don’t have time to do this by myself, my situation is too complicated – it is better left with lawyers”. The irony here is that you will end up on the path above – wasting so much more of your time, and making things a lot more complicated for yourself.
Option 4: The Secret To A Property Settlement
So the secret to a property settlement is….
Begin by preparing a Binding Financial / Separation Agreement yourselves, and then get it checked and verified by independent lawyers. This will save you $1000s in expensive legal fees. Understand that during lawyer meetings, most of your time would be consumed by replying to questions about things you already know (i.e. your financial positions, when you separated etc). It makes little sense paying expensive hourly rates for these meetings when you can just as easily input that information into your own professional template.
How do you prepare a Binding Financial Agreement yourselves?
Begin with a high quality, Professional Binding Financial Agreement Template (also known as a Separation Agreement). Binding Financial Agreements should not be hard to complete. If you find a reputable company (such as ourselves), you will be guided every step of the way with easy to follow instructions. Much like how today you can download your own DIY Will Kit online and get the whole procedure completed and verified in a fraction of the time and cost – the same thing applies to separation agreements.
When it comes to lawyers, the most time consuming (and thus expensive) part is the negotiations. If you can do this between yourselves, everything can be finalised within a week, as opposed to months. Furthermore, you have minimised any conflict and the chance of a lawyer drafting a one sided agreement.
The best news is that the Family Law Act requires each party to see independent lawyers. So during this meeting, you and your partner can have your Binding Financial Agreement proof read by independent lawyers to make sure everything is legitimate – this usually requires just one, simple meeting.
The result is the same – your future will be protected with a binding financial agreement. The big difference is the money, time and stress you will have saved by taking a more intelligent path.
Most importantly, you can move on with your life, knowing that everything is legally secure and binding, and confident that your future is protected.
ABOUT BRAMPTON KEATS
We are an Australian-based company that specialises solely in divorce / separation education, templates and products. Our agreements have been prepared by experienced lawyers with backgrounds in top-tier law firms, who have been admitted to both the High Court of Australia and the Supreme Court of Victoria.
For more information about our templates, please click here.