The grief, anger and confusion which almost inevitably surround the end of a relationship make it understandable that many people defer facing the legalities of separation.
However, there are risks in delaying matrimonial and de facto settlements:
- Loss of rights People coming out of a de facto relationship have a limit of 2 years from the date of separation in which to institute a claim for financial support and an adjustment of property.Parties to a marriage a limit of 12 months from the date of divorce in which to institute a claim for spousal maintenance and an adjustment of property.Claims which are not instituted within those limits are (subject to some minor exceptions) lost.
- Property acquired post-separation is up for claim Contrary to popular belief, assets are no divided at the value or in the form in which they existed at the moment of a separation. Rather, property which is acquired or increases in value after a separation is taken into account in the division. This means that assets acquired by virtue of the labour, investment and effort of one party are available for claim by the other. Those post-separation contributions are considered, however, are not given anywhere near dollar for dollar credit.
- Existing property is lost, reduced or wasted post-separation Similarly, the passing of time increases the opportunity for pre-existing assets to depreciate in value or be lost or waste, by or under the control of the one party. The floods are a timely reminder of unforeseeable events which can reduce the assets. Other examples include the GFC, equine influenza, and the deregulation of various industries. In unambiguous circumstances where there is a clear and definite fault, a party can be brought to account for such loss, however, those cases are few and far between and more commonly the loss is shared by the parties.
- Informal settlements As time passes, so too does the likelihood that parties arrange an informal settlement. An informal settlement (a verbal agreement on a division of assets or even a division of assets without legal documents) gives rise to two main problems:
- Information settlements do not preclude a person from making a later legal claim under the Family Law Act. There are many occasions when separated spouses divide their assets and move on with their lives (including accumulating more assets) only to find that their former partner learns of their increased wealth and makes a valid legal claim for a share of that property.
- If the ownership in real property is transferred from one person to the other without the benefit of a Binding Financial Agreement or a Family Court Order, then the transferor will be liable to pay CGT and the transferee will be liable to pay stamp duty. These levies are easily overcome by a legal settlement.
- Death of a party The death of a party:
- Is likely to significantly reduce the estate’s entitlement to a property adjustment, because the future financial needs of the party (which are otherwise taken into account) become irrelevant.
- Extinguishes the deceased’s (and heirs) right to financial maintenance under the Family Law Act.
- Causes the deceased’s interest in any property held under a joint tenancy to automatically transfer to the remaining owner – regardless of the terms of the deceased’s Will.
- In circumstances where they have not yet changed their Will (and their former spouse remains an executor and/or beneficiary) results in the living partner taking the benefit bequeathed under the Will.
- In circumstances where they are separated but not divorced, and they die without a Will – results in the living former spouse receiving a substantial benefit under the intestacy laws.
- In circumstances where the deceased had changed a pre-existing death benefit nomination on their insurance policy or Superannuation interest – results in the living partner potentially receiving that death benefit.
If you would like further information please contact our Toowoomba lawyers on Murdoch lawyers today at 07 4616 9898.
Prepared by Andrew Crooke
These are just some of the risks of delaying a settlement. Early independent legal advice will enable clients to obtain an individual assessment of the risks and rights in their particular situation.