Do I have to go to court to finalise post separation financial matters?
When you and your partner separate and/or divorce, formalising your financial and property matters can feel overwhelming. Many people believe that going to court is the only way to resolve these issues, but in Australia, that's simply not the case. While applying to the court is one option, particularly if there is irresolvable conflict, there are two other legally recognised pathways that don't require court attendance, as well as the informal avenue. Each has its own advantages and limitations, and the right choice depends on your unique situation.
Read on to explore some of the options and what are some of the pros and cons of each!
1. Application for Consent Order
A Consent Order is a formal agreement that you and your ex-partner make about dividing your property, assets, superannuation and financial matters that is sealed by the Court as an Order. Once you both agree, this order is submitted to the Court for approval. The court’s role here is to ensure that the agreement is fair and just for both parties.
Some Pro’s of this option include:
Legally binding: Once approved by the court, the Consent Order is enforceable.
There is often no need for a court attendance: You can simply submit your paperwork for the Court to review and it will be approved if it deems it fair and just (and meets the requirements of what the Court can order).
Lawyers are Not Required: Whilst legal advice and input may be desirable, it is not a requirement and many individuals complete and lodge these Applications on a self-represented basis.
Cost-effective: Whilst there is an applicable filing fee, it’s generally cheaper than a court battle because often it avoids court all together, or if the application is made during court proceedings, you avoid a court trial.
Control: You and your former spouse can craft an agreement that fits your specific needs, rather than having a court impose a solution.
Some Con’s of this option include:
Court review: While the process doesn’t involve going to court, the Court still reviews the terms to ensure fairness, which means you must be transparent about your assets and there is a chance the Court may not approve the order and/or required changes to be made before it will approve it.
Limitations: There are certain limitations in what the Court can and/or will approve as the Court has a duty to ensure you a fully financially separated as far a practical pursuant to sections 81 and 90ST of the Family Law Act 1975 (Cth). This means that unconventional or out of the box agreements may not be approved, even if you agree and it sees the best outcomes for you and your new bi-nuclear family dynamic.
Finality: Once approved, it can be difficult to change a Consent Order unless both parties agree or certain limited circumstances are present (such as fraud, deceit, duress etc).
An Application for Consent Order will be your only legally enforceable option if you do not wish to involve lawyers!
2. Binding Financial Agreement (BFA)
A Binding Financial Agreement (BFA) is an agreement made between you and your partner before, during, or after a relationship (whether you are married or de facto). It outlines how assets, liabilities, and financial resources will be divided if you separate. Unlike Consent Orders, BFAs are not reviewed by the court, rather they are contracts made directly between you and your ex-partner.
Some Pro’s of this option include:
No court involvement: You do not apply to the Court or involve the Court in any way.
Legally Binding: BFA’s are legally enforceable contracts if completed correctly.
Flexibility: You have complete control over the agreement and there is no need to submit it to a court for approval.
Useful for complex financial situations: BFAs allow for more complex financial structures, such as managing family businesses or multiple property portfolios. They also allow for less conventional and out of the box agreements to be formalised.
Some Con’s of this option Include:
Not reviewed by the court: While this may seem like a benefit, it also means that the agreement can be more easily challenged down the road if one party feels pressured or it's later deemed unfair.
Independent legal advice is mandatory: Both parties must obtain separate independent legal advice before signing the agreement. Further, given the complexity of BFA’s they ought to be drafted by a lawyer. This adds to the cost.
Enforceability issues: BFAs can be more challenging to enforce, especially if they have not been completely correctly or where certain steps were missed.
A BFA will be your only legally enforceable option if you have an unconventional agreement that the Court will not approve.
3. Informal Agreement
An Informal Agreement is a simple, mutual agreement between you and your former spouse about how to divide your property and finances after separation. It doesn't involve legal paperwork or court approval. You may agree on who keeps the family home, how bank accounts will be split, or how debts will be managed.
Some Pro’s of this option include:
Cost-effective: There's no need for legal representation or court fees, making this option the least expensive.
Simple and quick: You don’t need to deal with formal legal processes or time delays associated with court.
Flexibility: You can come to an agreement that suits both of you, without outside interference.
Some Con’s of this option include:
Not legally binding: This is the biggest drawback of an Informal Agreement. If one party changes their mind later or doesn’t follow through, you have no rights to enforce the agreement the the Court may make a determination different to that which you agreed should you seek to Court to intervene.
Risk of future disputes: Because it isn’t enforceable, there's a risk that one party may later try to alter the agreement, leading to further disagreements and, potentially, legal battles.
Risk to Future Wealth: Since it's not approved by a court or lawyer, there is risk that your former spouse could apply to the Court at a later date to make a determination and the Court will take into consideration your respective financial positions at the time it determines the matter.
Limitation: A limitation of informal agreements is that you will not be able to implement or effect some terms of agreement without it being legally formalised and you may also be subjected to avoidable taxes.
Informal agreements will not be an option if you wish to effect a superannuation split and may not be an option if refinances and transfers are required.
Making the Right Choice for You
Each option has its own strengths, and the right path for you depends on your financial landscape, emotional state, and personal goals. Navigating these decisions can feel overwhelming, which is why having the right professional support is essential. I bring a holistic and conscious approach to guiding my clients and supporting them engage the right professionals supports and choose the option that aligns with both their financial well-being, risk profile and emotional needs. This is exactly what we explore in Module 5 of my group coaching offering - The Break-up Blueprint: Financial Separation Made Easy.
If you're looking for compassionate support and practical tools to make informed decisions in your separation journey, it's not too late to join the program. Reach out to me for more information!
**Please note: This is general information only as at 24 October 2024, not legal advice. It is important to consult a legal professional for legal advice for your specific situation.**
