Currently, nearly one third of all marriages in Australia end in divorce. Following separation, ex-spouses and partners may be entitled to seek a division of the assets of the relationship. This includes all property held jointly or individually regardless of whether the assets were acquired before the commencement of the relationship or after separation.
In order to claim for property settlement, it does not matter which partner paid for the asset, or from where they got the funds.
There are a number of practical steps that can be taken to protect your assets including entering into a formal agreement with your partner (see 'Formal agreements with your partner: cohabitation, pre-marital and financial agreements'). It is sensible to consider these steps on entering into a relationship.
It is also advisable to review them on the occurrence of significant events in your relationship such as birth of children, purchase of property, receipt of significant gifts or other payments.
The best way to protect your assets will depend on your particular circumstances. Some of the steps below can have negative effects such as tax liability. We would recommend that you should seek legal and accounting advice before embarking on any particular course of action.
Although these practical steps will not prevent a claim in respect of assets you bring into the marriage, it may assist with more clearly identifying your contributions, which is of importance when determining your entitlements.
Formal agreements with your partner: cohabitation, pre-marital and financial agreements
The purpose of Agreements is not just to avoid legal disputes that arise after separation. An Agreement may also reduce the chances of disagreement arising between the partners during the relationship.
De facto couples may enter into a pre marital cohabitation agreement at any stage of their relationship. The Agreement can provide for the division of property on separation and financial arrangements during the relationship. The agreement does not need to be registered by a Court but it is necessary that each partner receive independent legal advice prior to entering the agreement.
Typically, an agreement may provide that partners will retain all assets owned by them prior to the relationship. It may also provide that any assets acquired during the relationship will be divided evenly or retained by the partner purchasing it.
If the agreement is properly made and each partner has received independent legal advice prior to entering the agreement, a court cannot make an order inconsistent with the agreement except in limited circumstances. This may include:
Married Couples can make binding financial agreements
Since December 2000, the Family Law Act has allowed married couples to enter into binding financial agreements before and during marriage and after separation. Properly prepared financial agreements can prevent spouses making applications to a court seeking property settlement or spousal maintenance after separation. Each spouse must obtain independent legal advice as to the agreement. Court approval is not necessary. There are only limited grounds to seek the setting aside of a financial agreement.
Currently there have not been any cases decided where a binding financial agreement has been set aside. It is expected though, that a binding financial agreement will not be set aside unless a party can establish one of the grounds to set aside exists. This may arise if there are children of the marriage, and the agreement does not contemplate or make provision for this.