Divorce and separation can be a highly stressful time in a person’s life, and it can be difficult to know what to do in the initial stages. A significant aspect of the separation process is arranging a property settlement with your former partner. This is the process of dividing all assets and debt. After reaching an agreement on property settlement, it’s then advisable to document the terms of your settlement.
There are two ways you can formalise a settlement, either by filing an Application for Consent Order with the Court or by entering into a Financial Agreement. Both are an effective way to document your settlement, however, there are several differences that parties should be aware of and that may guide your decision of which to choose.
Consent orders:
An Application for Consent Orders records the terms of the parties’ financial circumstances and the agreed terms of settlement. By granting the Application, the Court will issue Consent Orders as an enforceable record of the settlement. Parties do not need to obtain legal advice or be legally represented to prepare and file an Application for Consent Orders. However, many choose to do so. The process of preparing the Application details information about the parties’ financial situation including income, assets, liabilities, superannuation and financial resources. For the Court to grant Consent Orders, it must first consider and then determine that the agreement reached is ‘just and equitable’. This means that the Court needs to consider the financial circumstances of each party and whether the terms of the in-principle agreement are consistent with the likely range of outcomes in the event the Court was required to determine the settlement.
Financial agreement:
A Financial Agreement is a private agreement between the parties that records the terms of their agreement, although can be entered into prior to, during or after a de facto relationship or marriage. To be binding, a Financial Agreement must comply with legislative requirements, including:
- The agreement must be in writing;
- Both parties must receive legal advice as to the effect the Financial Agreement has on their legal rights as well as the advantages and disadvantages of entering into the agreement; and
- Each party must receive, and provide to the other party, a Statement of Independent Legal Advice to confirm that they received that advice.
Financial Agreements, when properly entered into, oust the jurisdiction of the Court. This means that either party cannot make an application to the Court for a financial settlement at a later stage, even if the terms of the settlement that they reached may not be considered ‘just and equitable’. A Financial Agreement can be challenged and set aside by a Court if it is not prepared properly or if certain grounds are successfully made out.
It is always highly recommended that parties obtain legal advice before or after a separation to consider which of these two options are most appropriate to their personal circumstances to formalise their financial settlement in the most cost-effective way.
By Michael Robson-Brearley, Solicitor at Coote Family Lawyers
