Even if you and your spouse end your marriage on good terms, you’ll have to make certain decisions and try to reach consensus on various issues. One of them is how to divide your property. Legally, this type of agreement is called a property settlement. Here’s what you should know about the different ways in which you can reach a legally binding (enforceable) property settlement within the context of family law.
The legal definition of property
In order to reach a property settlement, you must first understand what you can include in the agreement. In other words, you must understand the legal definition of ‘property’. In general, this term applies to any assets, liabilities and financial resources accrued prior to or during the relationship, or even after separation.
This basically means any or all of the following can be classified as property for the purposes of reaching an agreement as to how it should be distributed between you and your spouse:
- Real estate owned by one or both of you;
- superannuation (money for retirement);
- business interests;
- trust interests;
- assets acquired through inheritance;
Within this context it is also important to understand that any liabilities (shared or otherwise) must also be allocated between you as part of the property settlement. Liabilities include but are not limited to:
- Any outstanding debts;
- stamp duty obligations.
Reaching a property settlement without going to court
One of the most common questions couples have about reaching a property settlement is whether or not they have to go to court. Of course, the answer depends on the specific circumstances of each case. But if you and your spouse are still on speaking terms, you may be able to come to an agreement without court intervention.
These are your options if you can come to terms on your own. First, you can enter into a binding financial agreement. This type of agreement is essentially a contract that mandates how the property will be divided. As such, it can be made at any time prior to, during or after your relationship. However, there is an important caveat: you must each get legal and financial advice from qualified professionals before signing this document. Failure to do so will render the agreement invalid and the court will not approve it.
Your second option is simply to work out an agreement with your spouse and create a written document called a consent order. By signing it, you each promise to abide by the terms contained in the agreement. Although the court must approve the order to make it legally binding. You do not need to attendcourt to get this approval.
What if we can’t agree?
When separating couples can’t reach a property settlement on their own, the court must intervene. Specifically, it uses a five-step process to determine how the property should be divided. These steps are:
1) Identification of assets and liabilities: In this step you and your spouse/partner must accurately identify all of your assets and liabilities. Be sure to include all relevant property as defined in the list above. Once each of you has made a comprehensive list of your assets and liabilities, you must also assign a monetary value to each item. Collectively, the assets and liabilities will form an ‘asset pool’, which will then be allocated based on further evaluation.
2) Initial determination as to how to proceed: At this stage, the court will decide whether it is fair to proceed based on the information about your assets and liabilities as presented.
3) Assessment of the contributions each of you made: At this stage the court evaluates the financial and non-financial contributions made by each of you. In this context, the court will also assess any parenting and household contributions made by one or both of you. The court will then assign a percentage to each person’s contributions based on the assessment of the information provided.
4) Assessment of future needs: At this stage the court weighs each of your ‘future needs’ to determine whether it should revise the percentage decided in the previous step. These revisions could be based on your respective ages, any health concerns, differences in earning capacity, parenting responsibilities and so forth. When warranted the revised percentage is applied to the asset pool to determine what each person should get.
5) Determining a ‘just and equitable’ outcome: The last step in the process is to determine whether the outcome is fair to both people based on all of the circumstances. If not, additional revisions will be made. If so, the settlement process ends with drafting of relevant documents.
Get legal advice as soon as possible
The deadline for reaching a property settlement depends on the nature of your relationship. If you were in a de facto relationship, you have two years from the date of separation to reach this type of agreement. If you were married, you have 12 months from the time your divorce is finalised to do so. In either case, it is important to get proper legal advice as soon as possible so contact us today.