A property settlement is an arrangement made between parties to divide assets, liabilities and financial resources when a couple separate. A property settlement can be made with or without the court’s assistance.
Property can include almost anything of value, such as:
- Property owned jointly or independently;
- Business interests;
- Trust interests;
- Assets acquired through inheritance;
A property settlement is not limited to property acquired during the relationship. Property owned prior to and after the separation can be included in a property settlement. Liabilities will also be divided between the parties, whether they are held jointly or individually, such as:
- Tax; and
- Stamp duty obligations.
Making a property settlement without the court’s assistance
There are many resources available that can assist you in making a property settlement without the court’s assistance. However, due to the complex nature of such an agreement you should seek assistance from a lawyer to prepare your property settlement.
If you can make an agreement without the court’s assistance, you will save yourself time and money. You may also be able to improve your relationship with the other party which may help resolve any future disputes.
If you both agree on the terms of a property settlement you should have the agreement finalised either by applying to the court for a consent order or making a financial agreement.
A financial agreement is similar to a contract as it stipulates how property is to be divided between the parties. The Family Law Act 1975 (Cth) permits parties to a married or de facto relationship to enter into a binding financial agreement. A financial agreement can be made before, during or after a relationship and are often referred to as prenuptial agreements.
If you chose to make a financial agreement, you need to make sure you understand the terms of the agreement. Before signing any agreement each party must receive independent legal and financial advice. If formal requirements have not been met the agreement will be invalid and the court may set it aside.
If you and your ex-partner agree on a property settlement you can prepare a written agreement in the form of a consent order and then seek approval from the court. Once you sign the agreement you state that you agree to the terms provided in the document, similar to the way a contract works. Once the court approves the order it is given legal effect.
You may also apply for a consent order without having to attend court.
Court ordered property settlement
If the two parties cannot reach an agreement outside of court, they can apply to have a court make an order on their behalf. A court will only make an order if it is fair and reasonable to alter the parties’ property interests.
The court follows the following five step process to determine how property is to be split between the parties:
- Identify the existing legal and equitable interests of each party to the property;
- Determine whether it is equitable and just in the circumstances to make a property settlement order by reference to those established interests;
- Determine the direct and indirect, financial, and non-financial contributions (such as salary, care of children and homemaking) made by or on behalf of each of the parties as a percentage based entitlement;
- Consider whether a further amendment to the percentage based entitlement should be made taking into account the future needs of the parties (such as, care of children, health, financial resources, ability to earn); and
- Consider whether the result reached is a just and equitable result in all the circumstances.
The process to obtain a property settlement order using the court is discussed in detail in our Property Settlement article.
How much will I get from my property settlement?
Contrary to public belief, there is no presumption that property will be divided equally between the parties to a relationship. There is no set formula used by the court to determine a property settlement.
Each case is determined depending on the individual circumstances of the matter.
You may be able to lodge a caveat to prevent the other party from selling property. Once a property settlement is reached the caveat will then be lifted to allow you to split the property as per the settlement.
You should seek legal advice immediately if you believe the other party is attempting, or will attempt, to sell property.
A de facto couple has two years from the date of separation to make a property settlement. A married couple has 12 months from the time their divorce is finalised to make a property settlement. The court may grant an extension of time in exceptional circumstances but this is rare.
It may be within the interests of the parties to make a property settlement earlier, especially where assets belonging to the parties increase in value over time.