My wife and I split our assets after we separated. We didn’t need lawyers we just agreed. We hear that often. Whilst it may seem simple enough and may save on legal costs to not get the lawyers involved- not formalising things properly can come back to bite you later.
If you do not formalize your property settlement after separating or divorcing in Australia, several legal, financial, and personal risks may arise. The key consequences include:
- Uncertainty and Future Claims
Without a formalized property settlement, either party may make a claim against the other’s assets including superannuation interests in the future. This includes assets acquired after separation, which could still be subject to division. Your assets at separation may have increased in value. There is no automatic cutoff point at separation, unless the court finalizes the property division.
- Missed Legal Deadlines
While you can apply to the Federal Circuit and Family Court of Australia for a property settlement, there are strict time limits that apply to do this:
- Divorce: Applications must be made within 12 months of the divorce being finalized.
- De facto relationships: Applications must be made within two years of separation. If you miss these deadlines, you will need special permission from the Court to proceed, which is not guaranteed. That could also be expensive.
- Exposure to Future Debt
You may have agreed as to who is going to be responsible for which debts. Without a formalized settlement though, financial ties between the parties remain intact. If your ex-partner accrues debts in joint accounts or defaults on shared liabilities (like a mortgage), you could still be held legally responsible for it.
- Tax and Financial Implications
Property transfers between separated couples may qualify for tax exemptions, such as stamp duty relief, if formalized through a formal Court order or binding financial agreement. Without formalization, you may miss these benefits, leading to unnecessary financial costs.
- Difficulty Moving On
Unresolved financial ties can complicate future financial planning, including purchasing property, securing loans, or entering into new relationships. Creditors may also hesitate to extend credit to you in the future if prior financial arrangements remain unsettled.
- Emotional and Practical Strain
Unresolved property matters can lead to prolonged disputes, straining relationships and causing emotional distress. It can also complicate parenting arrangements including obligations as to payment of child support for minor children if financial matters remain entangled.
How to Protect Yourself
Formalize the settlement through a Consent Order (approved by the Family Court) or a Binding Financial Agreement (drafted and certified by legal professionals). These provide legal finality, ensuring that both parties understand their rights and obligations. Seeking legal advice early in the process can help you navigate this effectively and avoid long-term complications.
Are you in this situation? Speak to one of our experienced solicitors on 08 8344 6422.