Reached an Agreement About Property – Now What?
If you and your former partner have reached an agreement about how the assets of your relationship will be divided, it is important that the agreement is properly documented. It is important to do this to prevent future claims, to ensure the protection of assets accumulated post-separation and to ensure effective estate planning. There are two types of documents that can be prepared to formalize the agreement; these are Consent Orders or a Financial Agreement.
What are Consent Orders?
Consent Orders are orders made by the Court by agreement between the parties.
If proceedings are already on foot, it is open to the parties to settle the matter on a final basis by submitting proposed Consent Orders to the Court. The proposed Consent Orders should be filed in whichever Court the proceedings are before (Federal Circuit Court of Australia or Family Court of Australia). This can be done at any stage of the proceedings. If the Court is satisfied the Consent Orders are just and equitable, the orders will be made and sealed by the Court. The Court will retain a copy and the parties will each receive a copy. From the date the Consent Orders are made by the Court they will be legally binding.
If proceedings have not been commenced, it is still open to the parties to ask the Court to make Consent Orders. This is done by filing an Application for Consent Orders and proposed Consent Orders in the Family Court of Australia. The Application for Consent Orders describes the parties’ financial circumstances including the assets, liabilities and superannuation of the parties, the contributions of each party, incomes and parenting and homemaker responsibilities. If the Court is satisfied the Consent Orders are just and equitable, the orders will be made and sealed by the Court. The Court will retain a copy and the parties will each receive a copy. From the date the Consent Orders are made by the Court they will be legally binding.
Consent Orders can be made in relation to both parenting and property matters.
Consent Orders must be filed within 12 months of the divorce order taking effect or 2 years of the breakdown of a de facto relationship. Leave of the Court will be required to file Consent Orders outside of this timeframe.
What is a Financial Agreement?
In contrast to Consent Orders, a Financial Agreement is not lodged with the Court. You do not need the Court’s approval for the Financial Agreement to be binding on the parties.
The Family Law Act 1975 allows for parties to a marriage or de facto relationship to enter into a Financial Agreement about the financial arrangements should their marriage or de facto relationship break down. You can make a financial agreement before, during or after a marriage or de facto relationship. Financial Agreements can cover:
- financial settlement (including superannuation entitlements) after the breakdown of a marriage or a de facto relationship
- financial support (maintenance) of one spouse by the other after the breakdown of a marriage or a de facto relationship,
- any incidental issues.
Financial Agreements cannot be made in relation to parenting matters.
For a financial agreement to be legally binding, both parties must have:
- signed the agreement, and
- received independent legal and financial advice before signing; and
- at the time of making the Financial Agreement, the parties are not the spouse parties to any other binding agreement; and
- the agreement must be expressed to be made under ss90B, 90C, 90D, 90UB, 90UC or 90UD of the Family Law Act 1975.
It is important to know that the Court can declare a Financial Agreement invalid, and set it aside. The situations in which that is possible are provided at Section 90K (married couples) and Section 90UM (de facto couples) of the Family Law Act 1975. A Financial Agreement may be set aside when the Court is satisfied that:
- the agreement was obtained by fraud (including non-disclosure of a material matter);
- a party to the agreement entered into the agreement:
- for the purpose of defrauding or defeating a creditor or creditors;
- with reckless disregard of the interests of a creditor or creditors of the party;
- a party to the agreement entered into the agreement:
- for the purpose of defrauding another person who is a party to a de facto relationship with the spouse party;
- for the purpose of defeating the interests of that other person in relation to any possible or pending application for an order under s 90SM of the Family Law Act, or a declaration under s 90SL of the Family Law Act in relation to the de facto relationship;
- with reckless disregard of those interests of that other person;
- the agreement is void, voidable or unenforceable;
- in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out;
- since making the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child, a party to the agreement will suffer hardship of the court does not set the agreement aside; or
- in respect of making of a financial agreement – a party to the agreement engaged in conduct that was, in all the circumstances unconscionable; or
- a payment flag is operating under Pt VIIIB on a superannuation interest covered by the agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement under that Part; or
- the agreement covers at least one superannuation interest that is an unsplittable interest for the purposes of Pt VIIIB.