Property Settlement Agreements: More than just a ‘piece of paper’ signed by your lawyer – Part 1
When you reach agreement about how your property will be distributed after separation it is essential to document the agreement in a formal way. Without a formal agreement, that is, either a consent order made by the Family Court of Australia or a financial agreement entered into under the Family Law Act, there is no certainty that your matter is truly at an end.
We have seen far too often a scenario where the parties have written down their agreement on a piece of paper, gone to the effort of signing it in the presence of a Justice of the Peace, only for the agreement to be ignored when one party seeks a further distribution of property. A written agreement, signed in the presence of the Justice of the Peace or other witness, is not a binding document, unless it is a consent order or financial agreement.
In this two part article you can find out:
Part 1 – the basics
- What is a consent order;
- What is a financial agreement
- Why do you need a financial agreement or consent order?
- Why is are these agreements more than just a ‘piece of paper’ signed by your lawyer?
Part 2 – the process
- What is the process?
Part 1 – the basics
What is a Consent Order?
Where you have reached agreement about your property matter you can make an application to the Family court of Australia to have the agreement made into a formal court order. The process involves completing an Application for Consent Orders and preparing formal court orders (proposed Orders) in the form that will be accepted by the court. The parties sign the Application and proposed Orders and lodge them with the Family court, paying the required lodgement fee.
This process can be done with or without legal advice, though we recommend seeking advice about the proposed Orders to make sure that they are within the range that the court would find acceptable, and therefore make the orders. It is also important to consult a lawyer about the drafting of your proposed Orders.
You can enter into a consent order about all aspects of property settlement, save and except that you cannot contract out of any spouse maintenance obligation. Any reference to spouse maintenance is best dealt with in a financial agreement.
What is a Financial Agreement?
A financial agreement is an alternative way to formalise your property settlement. It can include all of the same information and agreement (similar to the proposed Orders) that you have reached. The difference lies in the strict legal obligations imposed by the Family Law Act. These exist because through a financial agreement, you are contracting out of your right to have the Family Law Courts determine your property matter, including any right to spouse maintenance.
For a financial agreement to be binding it must:
- be in writing;
- be signed by all parties;
- before signing the agreement, each party must receive independent legal advice from a legal practitioner about the effects of the agreement on the rights of the party and the advantages and disadvantages of entering into the agreement at the time the advice is provided;
- before or after signing the agreement, each party must receive a signed statement by the legal practitioner confirming that the above advice was provided with a copy of the statement provided to the other party or their lawyer;
- the agreement has not been terminated by further agreement or set aside by the court.
Due to the nature of a financial agreement there is a significant amount of work that goes into the agreement to make sure that the strict legal requirements are complied with and that the financial agreement is binding and protects your interests.
For those reasons, a financial agreement differs to a consent order given the strict requirement for independent legal advice. Both parties must engage with and attend upon a lawyer for advice about the Financial Agreement.
Why do you need a financial agreement or consent order?
A properly drafted financial agreement or consent order has the effect of ending the financial relationship between you and your spouse. The document provides for the distribution of property between you on terms that you agree. The ability to come back and make a further claim is limited usually only to defects in the terms of the agreement you have reached including failing to disclose information between spouses.
Where your property settlement agreement is set out in either a financial agreement or consent order, you also have the benefit which flows from those documents relating to the transfer of property. These documents allow you an exemption on transfer duty which is ordinarily payable on the transfer of property. For example, if you have agreed that one of you will retain a property that is owned jointly then without a financial agreement you will need to pay transfer duty on one half of the value of the property. With a financial agreement or consent order, no transfer duty is payable.
Why is are these agreements more than just a ‘piece of paper’ signed by your lawyer?
Due to the nature of a financial agreement in particular, there is a significant amount of work that goes into the agreement, however it is drafted, to make sure that these strict requirements and obligations are complied with and to ensure that the agreement is binding and protects your interests.
Up next… Look out for Part 2 – the process.
In the mean time if we can assist you with your property settlement or you have any questions about the best way to document your agreement, contact our offices on (07) 3343 9522 or (07) 5446 1745 or through our contact us service here.