I have reached an agreement with my partner regarding property settlement – what happens next?
If you and your former partner have reached an agreement about how your assets and liabilities will be divided, it is important to formally record the agreement so that it becomes legally binding.
How do I formalise my property settlement?
To bring finality to your separation and ensure your agreement is enforceable, specific legal steps must be taken. A property settlement can be formally documented in one of two ways:
- Lodging an Application for Consent Orders and obtaining a Court Order; or
- Executing a Financial Agreement.
An informal agreement is reached when you do anything except for these two processes, for example preparing your own contract or failing to prepare anything in writing at all.
What are the risks of not legally formalising my property settlement?
If you divide property informally without legally documenting the agreement, it will not be binding or enforceable. This can have serious consequences, including:
1. Future claims by your former partner
It leaves you open to a later claim by your former partner, potentially a larger claim. This means that any property or assets you acquire in the future (not just the property that you have at the time you were in a relationship or at the time of separation) are at risk of a claim.
For example, if you later receive an inheritance, win the lottery, increase the value of your assets, grow your superannuation, or purchase a new property, those assets may be at risk of a claim.
2. Loss of your right to apply to the Court
You may miss the limitation period and lose the right to have the Court consider your property settlement claim.
3. Effect on your estate
In South Australia, a former spouse or former domestic partner of a deceased person is entitled to contest an estate where a property settlement has not occurred.
As such, formalising your property settlement protects you from future claims by your former partner, safeguards both your current and future-acquired assets, and provides certainty and peace of mind. It allows you to move forward with confidence, knowing your financial position is protected.
What about a divorce?
Divorce and property settlement are two separate legal processes.
A divorce is the legal termination of a marriage. It is important to note that a Divorce Orders does not resolve property or parenting matters. These issues must be considered and addressed separately.
Some people choose to remain legally married for many years after separation. However, there are several important reasons why applying for a divorce may be appropriate, including:
- It allows you to remarry if desired.
- It starts the 12-month time limit for commencing property settlement or spousal maintenance proceedings.
- If you have made a Will in which you name your spouse as a beneficiary or executor, these clauses will continue to have effect, even if you separated many years earlier. A Divorce Order will cause these clauses of your Will to be revoked.
- If you do not obtain a divorce, your spouse may still have an entitlement to your estate under intestacy laws.
- Many superannuation funds pay death benefits to a legal spouse, even if you have been separated for a long time.
- A divorce provides formal legal recognition that the marriage has ended, which can offer a sense of closure and a clear foundation for moving forward.
Divorce Applications are made through the Federal Circuit and Family Court of Australia, and can be filed as either a joint application or a sole application.
For further support or tailored legal advice, please contact our experienced Family Law team.