The perils of delaying your family law property settlement
- July 23, 2021
- Jennifer Hetherington
- 17 Comments
This blog post has always been one of our most popular. With the rise in property prices in Australia – and particularly Queensland – since the start of the COVID-19 pandemic, it was timely to update it.
Reasons not to delay your family law property settlement
As a family lawyer it’s not uncommon for me to encounter people who wrongly believe that they cannot do their family law property settlement until they have finalised their divorce.
Or they just haven’t got around to it.
Here are important reasons why it is important to both finalise your family law property settlement as quickly as possible after separation and get divorced as soon as your 12 month time limit expires.
Until you are legally divorced, your spouse remains your spouse.
That means more than simply not being able to remarry. The main impact is what can happen on your death. If you don’t have a Will, your estranged spouse may still be considered to be your spouse for the purposes of succession law.
That means that they may receive an entitlement on your death.
If you don’t have a Will and want to make sure that your ex doesn’t get treated as if you were still playing happy families, then you need to get your family law property settlement done ASAP. Get started now.
But I have a will!
reat! That’s important – and even more important to update it after separation. But, even if you have a Will, until you are divorced, your former spouse may be able to make a claim under family provision legislation, as if they were still your spouse. Again, this basically means they can contest your will and may be treated by the court as if you were still a happy couple at the date of your death.
You might not think that you’ll care what happens after you die, but your children might! If you haven’t updated your will since separation or divorce, contact us to discuss how to do that.
Why is a divorce important? I'm not planning to remarry
Once you are formally divorced, even if you don’t change your will, in some states and territories in Australia, any gift to your former spouse in your Will, will be automatically invalid.
So, if you just haven’t got around to it, your divorce can protect your children’s inheritance.
The general issue of post-divorce property settlement is in focus after the Family Court heard a case involving a couple who were together for 17 years and had two children. The husband inherited a $715,000 property from his late brother’s estate three years after separation. A judge excluded the property from the asset pool and the woman appealed, and won.
The two best ways to protect yourself
The moral of this story is:
- get your divorce once the 12 month time limit has expired; and
- make sure you’ve got a valid Will that you update once you’ve separated
Do I have to wait until I am divorced to do a family law property settlement?
Some wrongly believe that they cannot do their property settlement until they have finalised their divorce. You can actually do it as soon as you like. Time limits apply after you are divorced.
Contrary to some incorrect beliefs floating around the community/internet/social media, your assets are not divided at the date of separation. They are divided at the date that orders are made.
That means, if you manage to negotiate a settlement with your ex, then all the assets would have to be disclosed in the documents to legally formalise your agreement are the assets that you have at the date that that consent orders are being signed.
So, if you win lotto, that can be included. If you buy another property, that can be included.
If you can’t reach a resolution and your matter goes to court, you could be waiting two to three years for a trial date, but the judge will still use the values of your assets and liabilities at the date that the matter is being heard in court.
What if my property value goes up after separation?
Unfortunately, whilst that delay was occurring, the housing market improved and therefore the value of the property increased. Other assets in the property pool did not increase at the same proportion, so every incremental increase in the value of the house made her desire to retain it less achievable.
If you’re in a rising property market, and you want to retain a property, it makes sense to try to get your property settlement done as quickly as possible, otherwise it may make it impossible to keep that house.
Is a house I bought after separation included in our property settlement?
What if it increases in value?
Any assets that you acquire after separation can be included in the property pool. If these increase in value, then the increased value is what goes in, not what you paid for it.
How can I protect an inheritance from a family law claim?
As well as assets you purchase, lottery wins, gifts, and inheritances received after separation are all part of the property pool.
In a recent case decided by the Full Court of the Family Court of Australia, the court said that a property the husband had inherited three years after separation was to be included in the property pool.
The Court made it very clear in the judgment that all property goes in.
Nothing is excluded or immune from the property pool. The question of what contributions have been made to that property will be considered, but if it is the only significant piece of property in a property pool then it can have far-reaching ramifications.
Prospective inheritances (that is, where the person who has made the will still has capacity to change that will and is alive) are not taken into account by the court.
If you have separated and think you might receive an inheritance in the next year or so, particularly if that might be a significant inheritance, then it would be a definite advantage to you to get your property settlement done quickly, otherwise the inheritance can form part of the property pool.
I don't want to go to Court
That’s the best attitude to have – it’s expensive and stressful and most people do not need a judge to make a decision for them.
We can help you reach a family law settlement without court.
Collaborative law offers an opportunity for you and your former spouse to negotiate an agreement respectfully, away from the courts, taking into account the interests and needs of all family members including your children.
You both sign a contract and commit to not going to court. The Collaborative process can resolve your family law property settlement in as little as three months and costs significantly less than taking your family law matter to court.
It is also the process most likely to result in you and your former partner having an amicable co-parenting relationship moving forward.
Mediation is compulsory in family law parenting matters, and is virtually compulsory in property matters. Even if you do file in court, you will inevitably be required to do mediation by your judge after your first court date.
It therefore makes sense to mediate before you decide to file court proceedings, as it has an incredibly good success rate. I am a mediator and firmly believe that for those matters where Collaborative law is not appropriate, mediation offers the next best process. There are options for fixed fee mediation which can give you certainty about your costs.
Depending on what needs to be undertaken in terms of any valuations and disclosure of documents, a mediation can be arranged and held within about a three-month period.
Arbitration is essentially “private judging”. I liken it to choosing to use a private hospital with a specialist of your choice, rather than being on the waiting list for a public hospital.
With arbitration, you get to choose an experienced family lawyer and accredited arbitrator at a time of your choosing. You avoid the two to three year delays in the Federal Circuit Court and Family Court of Australia, where you have no choice over which judge you will get.
You are also able to design your own arbitration process and agree to conduct the matter in a way that you and the other party agree, flexibility which is not available if you take your family law property settlement to court.
All three of these processes can have you concluding your matter within a period of about three months if everybody is motivated to move things along.
This results in significantly decreased legal fees over going through court, but also means that you can draw a line in the sand and move on and not face the issues that have been discussed above.
Any family lawyer who is not discussing these three options with you as being the best ways to conclude your family law property settlement instead of going to court, is perhaps not the person that you need in your corner.
Choose a collaborator, problem-solver and strategist – not a gladiator who will run up fees.
Finalise your property settlement and divorce as soon as possible
– get your divorce done once you’ve been separated for 12 months
– whether you were married or de facto, get the ball rolling on your property settlement as soon as you can after separation
What if my ex has already filed in the Family Court?
This doesn’t mean you can’t still reach an agreement.
The Family Court provides many opportunities to reach agreement and less than 5% of cases end up being decided by a judge on a final basis.
Most matters go to mediation which is a very effective way to reach a final property settlement agreement.