You are going to need a separation financial agreement because even if the divorce process is over, the financial relationship is not.
That’s the reality for many couples who have divorced in Australia. Even after the court makes a divorce order, there may still be disputes about property division, spousal maintenance, and other financial matters.
In some cases, parties can resolve disputes about financial separation through mediation or negotiation. But in other cases, they may need to approach the family court for resolving these matters.
One way to avoid these disputes is to enter into a financial agreement before or during the marriage. A separation financial agreement is a legally binding contract that sets out how a couple will divide assets and debts in the event of a divorce or de facto separation.
What Is a Financial Agreement?
A binding financial agreement under the Family Law Act 1975 Australia is a legally binding document that formalises the property settlement between two separated parties. Parties can make it before, during, or after a marriage or de facto relationship. The agreement typically contains:
- A list of all assets and liabilities that need to be divided between the parties
- A statement of how the assets and liabilities will be divided between the parties
- Provisions for spousal maintenance
- Details of any child support arrangements
- Any relevant details about parenting arrangements; and
- Signatures of both parties and their lawyers indicating that they have received independent legal advice and understand the terms of the agreement.
To be legally binding, a financial agreement must meet certain technical requirements, which are set out in sections 90G (for financial agreements about marriages) and 90UC (for financial agreements about de facto relationships) of the Family Law Act 1975. It is important to seek legal advice before entering into a financial agreement to ensure that it is legally binding.
What Does the Family Law Act Say?
Section 90D of the Family Law Act 1975 provides that a separation financial agreement is made when, after a court grants a divorce order in relation to a marriage, the parties to the former marriage make a written agreement with respect to the matters enumerated below.
At the time of the making of the agreement, the parties to the former marriage are not the spouse parties to any other binding agreement.
The matters that the parties must include in the separation financial agreement include the following:
- how all or any of the property or financial resources that either or both of the spouse parties had or acquired during the former marriage is to be dealt with;
- the maintenance of either of the spouse parties;
- incidental or ancillary matters; and
- other matters.
Further, a separation financial agreement may terminate a previous financial agreement if all of the parties to the previous agreement are parties to the new agreement.
What Does a Separation Financial Agreement Contain?
Aside from those mentioned in the Family Law Act 1975, a financial agreement made after a divorce order in Australia typically contains all assets and liabilities that need to be divided between the parties, including but not limited to:
- The family home;
- Cars, household contents, and other personal property;
- Money in banks, building societies, credit unions, and other financial institutions;
- Investments in real estate;
- Interests in businesses, shares in companies, and life insurance policies;
- Superannuation;
- A statement of how the parties will divide assets and liabilities between them;
- Provisions for spousal maintenance, if applicable;
- Details of any child support arrangements, and;
- Signatures of both parties and their lawyers, indicating that they have received legal advice and understand the terms of the agreement.
One thing to keep in mind is that financial agreements must meet strict legal requirements to be legally binding. Therefore, we recommend that parties seek independent legal advice before entering into a financial agreement.
Consequences of Not Having a Separation Financial Agreement
But what happens if you do not prepare a separation financial agreement after divorce? These may be the consequences:
1. Time limits. If you haven’t worked out your property arrangements, you must apply to court for property orders within 12 months of your divorce. After this time, you may need to seek special permission from the court to apply for property orders, which can be challenging to obtain.
2. Legal costs. If you cannot agree on financial arrangements after separation, you may need to go to court, which can be costly.
3. Uncertainty. Without a financial agreement, there may be uncertainty about how the parties will divide property and finances. This can cause stress and anxiety.
4. Risk of unfair division. If you do not have a financial agreement, the court will decide how to divide your property and finances, which may not be in line with your wishes.
5. Lack of control. Without a financial agreement, you may have less control over the division of your property and finances, as the court will make the final decision.
In summary, not having a financial agreement after divorce in Australia can lead to legal and financial uncertainty, as well as a lack of control over the division of property and finances. Seek legal guidance and try to sort out your property settlement immediately after separation to avoid these consequences.
Family Law Expert on Financial Agreements
Our family lawyer can offer several services concerning financial agreements, including:
- Preparation of financial agreements for couples who wish to formalise their informal agreement about property settlement.
- Preparation of a separation agreement.
- Lodgement of consent orders.
- Independent legal advice to clients who are considering entering into a financial agreement, including the requirements for the agreement to be legally binding.
- Negotiation with the other party or their lawyer to reach an agreement on the terms of the financial agreement.
- Drafting of post-nuptial agreements.
- Representation in family law courts.
- Valuation of assets, such as superannuation, businesses, and family trusts, to ensure that they are properly accounted for in the financial agreement.
JB Solicitors are family law experts, and we can offer a range of legal services concerning financial agreements. Contact us today.
