Risks in delaying property
settlements
Parents, children and or family members who have endured or
witnessed a relationship breakdown can certainly attest to the challenges and
intimidation separated parties face as a result. Not only are they emotionally
challenging, they involve life-changing and confronting decisions, particularly
adjusting to the severance of any financial ties and or resolving care
arrangements for the children.
It is not uncommon to come across clients who have separated
and left finalising their property settlement for many years. Empathetically
and understandably so, property negotiation with a former partner is probably the
last detail on the minds of separated parties, given the need to also address emotional
issues resulting from separation – however it is imperative that you know the considerable
risks associated when discussions surrounding a family law property settlement are
left for a significant period.
It is important to be aware of the time limits under the Family Law Act 1975 in brining
proceedings for property settlement or spousal maintenance before the Court,
which is designed to promote property settlements within a practical time frame.
- For married couples, you have 12 months from the date of divorce;
- For de facto couples, you have two years from the date of separation.
For married couples, we do not recommend applying for
divorce until property settlement has been finalised or proceedings commenced
seeking property orders. For de facto couples, we commonly run in to the issue
of being out of time and we see parties expending legal costs to argue the
exact date of separation – therefore reiterating the importance of finalising
your property settlement at the first available opportunity following
separation.
These time frames exist under the Act to provide certainty to both parties and is beneficial in cases
where one party is deliberately skirting the negotiation process (usually the
party required to pay maintenance or the party who has smaller future needs)
and delaying a property settlement.
In the event you wish to pursue a property or maintenance claim
outside the designated time frame, you can only do so with the Court’s
permission, that is, leave must be sought from the Court to begin proceedings. The
Court must be satisfied that hardship will be caused to you or a child if leave
was not granted. In maintenance proceedings, you must demonstrate that at the time
the ordinary time limit expired, you were unable to support yourself without an
income tested pension, allowance of benefit.
Another significant risk associated in delaying a property
settlement is that values of assets, liabilities and or superannuation, as well
as the parties’ financial circumstances may change between the date of
separation and when negotiations begin and or the matter is brought before the
Court –the law looks at and considers the asset pool at the time of any trial,
not at the date of separation. This means that any lottery wins or inheritances
accumulated may be included as part of the asset pool for division. Similarly, delaying
a property settlement whilst meanwhile disposing of any matrimonial assets
prior to a settlement can be treated by the Court as that the person has
already received part of their property settlement entitlement, thereby reducing
their entitlement in the final settlement.
When property settlements are left for a significant period,
this also increases the risk that one party may die before proceedings are
initiated. Any property owned as joint tenants such as the matrimonial home
will be transferred automatically to the surviving tenant (usually the ex-spouse),
regardless of what the deceased’s Will states and regardless of whether the parties
have separated.
It is for these complexities and risks involved in determining
the parties’ entitlements after a long period of separation that we advise you
to speak to one of our experienced family lawyers post-separation. Or, if you
are in a position where the ordinary time limit has lapsed, we can tailor our
advice to you accordingly taking into account your circumstances.
On the same note, if you have managed to reach an agreement with
your former partner about a property settlement, we encourage you to document
it in a legally binding and recognised manner, either through Consent Orders or
a Binding Financial Agreement. The risks you face otherwise is that your
partner later decides to change the agreement, which was never formalised in
the first place. Putting the terms of settlement in a legally enforceable way
would save considerable amount of time and costs in the future if the “informal”
agreement was challenged.
Please do not hesitate to contact us on 03 9614 7111 or
email us out of hours on melbourne@nevettford.com.au.
