We frequently see family law clients who have a preconceived idea of the method they wish to use to record their separation, often based on their own research on Google. There are two legal methods to record your separation agreement– by way of a Binding Financial Agreement, which is a private agreement, or by way of filing Consent Orders with the Family Court. There are pluses and minuses to both – we discuss these below.
If you do not formalise your separation agreement by way of either a Binding Financial Agreement or Consent Orders, then it remains open for either party to make application to the Family Court or Federal Circuit Court for a property settlement to take place. Such an application must be made within 12 months after divorce for a married couple, or up to two years after separation for a de facto couple. If there is a compelling reason for delay, an application may be brought outside of these time frames providing the applicant can show they would suffer hardship if permission to bring an application outside of time was not granted.
We therefore recommend that parties formalise their separation agreement either privately by way of a Binding Financial Agreement or with Consent Orders filed with the Court so as to avoid nasty surprises later on, particularly as the assets of both parties will be assessed as at the date of the application to Court rather than the date of separation, which is upsetting if you have made big gains since separating from your spouse. Bear in mind that even inheritances and Lotto wins will be included as marital assets up to the time that a separation agreement is formalised.
Binding Financial Agreements
Binding Financial Agreements are a private agreement between the parties to a marriage, which can be entered into prior to, during or at the end of a relationship, to set out the division of assets between the parties if or when separation occurs.
Advantages of a Binding Financial Agreement:
- Financial disclosure is not required to take place between the parties;
- The agreement documented does not have to pass the test applied by the Courts to consent orders, that they be just and equitable and commensurate with the outcome that could be expected if the matter came before a Court. They are therefore useful if the parties wish to reach an agreement that may not be within the realm of what a Court might order when it is bound by the provisions of the Family Law Act 1975.
- There is no need to wait for the Court Registrar to endorse the orders, which can take 4-6 weeks – as soon as both parties sign and have independent legal advice, the agreement will be binding providing it complies with the requirements for Binding Financial Agreements under the Family Law Act.
- Even with protracted negotiations between lawyers, they are very likely to be less expensive than going to Court to dispute a property settlement
Disadvantages of a binding financial agreement:
- They are liable to being set aside upon application to the Court by an aggrieved party if the many technical elements required under the Family Law Act have not been met
- Both parties require independent legal advice for the BFA to be valid, which can lead to protracted negotiation
- They cannot deal with the splitting of superannuation
- They cannot deal with orders in relation to spending time with children, or child support
- They usually incur higher legal fees than Consent Orders which is reflective of the risk to legal practitioners that if they are set aside by a Court there may be repercussions for the practitioner who prepared them
Consent orders filed with the Family Court
Advantages of Consent Orders:
- The parties are not required to have legal advice, but it is prudent to obtain legal advice to ensure the orders have the best chance of being endorsed by the Court
- It is not necessary for each party to have their own lawyer, the orders can be filed by one lawyer
- They are generally cheaper than a binding financial agreement, as the onus for ensuring the orders are just and equitable falls on the Court, whereas the Binding Financial Agreement may be set aside if any of the factors required under the Family Law Act has not been complied with. There is less risk and more certainty that consent orders once made will be unassailable
- Consent orders are able to include orders in relation to children, including spending time with the children and child support
- Consent orders are able to deal with the splitting of superannuation
Disadvantages of Consent Orders:
- The parties are required to make full financial disclosure to each other and sign a statement of truth as to the veracity of such disclosure
- There is usually a 4-6 week wait after the orders are filed for them to be endorsed by the Court Registrar
- In the event the Court Registrar takes issue with any element of the consent orders, they are liable to be sent back with requisitions seeking further information
- They must pass the just and equitable test under the Family Law Act which in practice means the consent orders must not leave a party worse off than if a Judge decided what should happen
- There are laborious forms to fill out in order to comply with Family Court requirements for full financial disclosure
In most cases for the average family, we find that Consent Orders filed with the Family Court are the more suitable option. However, for those with more unusual circumstances, the flexibility available under a Binding Financial Agreement can allow them to enter an agreement which both parties are happy with but which may not have been approved by the Court system.
Should you have any queries in regard to how best to document your separation, please contact James Matthies at Matthies Lawyers to gain a clear understanding of your options or call +61 3 8692 2517 today.
Disclaimer: This article contains general information only and is not intended to be a substitute for obtaining legal advice.