As a family lawyer, this is a question I am often asked. As with other major life decisions, I find it is helpful not just to focus on the benefits of taking a certain action, but the risks created by not doing so. To assist you to consider whether, and why, you should take action to formalise your family law settlement, I have outlined below the potential risks of not doing so for both children’s and de facto/matrimonial property agreements:
Potential risks of failing to formalise your parenting arrangements:
Failing to obtain consent orders or enter into a parenting plan regarding the parenting arrangements agreed to by you and the other parent, may create the following risks:
• if the other parent absconds with, or fails to handover, your child, there is no evidence of the agreed parenting arrangements with which to take action to recover your child. This can complicate the recovery of your child significantly. If this is an issue or potential issue in your case, legal advice is highly recommended as to the most appropriate action to take; and
• if, in the future, you and the other parent no longer agree on the parenting arrangements for your child, conflict and disputes may arise, potentially leading to family law court proceedings. This can be avoided in most cases by a parenting plan or consent order that clearly sets out the agreed arrangements.
Potential risks of failing to formalise your de facto/matrimonial property agreement:
Failing to enter into consent orders or a financial agreement setting out the agreed division of the de facto/matrimonial property pool may create the following risks:
• you are deemed not to have formally divided your de facto/matrimonial property pool according to the laws which govern family law property settlements in Australia;
o as such, your former partner may commence court proceedings in the future seeking a greater “slice of the pie”, for example, at a time when your financial circumstances have improved;
o as the property pool is determined at the date of trial or settlement, your assets at that time, when you may be in a stronger financial position, are divided, even though separation and the informal settlement may have occurred many years prior; and
o conversely, if you are seeking a formal property settlement at a future time, because, for example, you discover that your former partner failed to disclose all of his/her assets at the time of your informal settlement, and his/her financial position has since declined, the outcome of your property adjustment application may be prejudiced.
• your informal settlement may be well below your entitlements or not in your interests. When taking steps with an experienced family lawyer to formalise your agreement, he/she can assess these issues for you;
• your informal settlement may not have considered and catered for all relevant assets, liabilities, financial resources and superannuation interests. Legal advice from an experienced family lawyer should identify any such issues and ensure they are considered in any formal property settlement deal;
• your informal settlement may not have considered all relevant legal issues, leaving you legally and financially exposed;
• you will have to pay stamp duty on the transfer of dutiable assets such as real property, which can be in the tens of thousands of dollars. Transfers of dutiable property pursuant to consent orders or a financial agreement, attract stamp duty exemptions, which often lead to significant savings to the parties even after their legal fees are paid; and
• capital gains tax and other tax issues may arise from your informal settlement, which you were not aware of, and did not take into account, or settle off, as part of the informal settlement.
Take home messages:
• it is important to be aware of the legal time limits that apply to resolving your de facto or matrimonial property settlement and any spousal maintenance issues, of 2 years from separation for a de facto relationship, and 12 months from a final divorce order for marriages; and
• Consult an experienced family lawyer for advice about formalising any family law agreements you might reach with the other party, whether they involve parenting, property, spousal maintenance, child support or other issues; and
• if you and the other party have already agreed on a family law settlement/s, but have not yet formalised it according to the requirements of Australian family law, it may not be too late. Obtain family law advice as to your options and the benefits and potential risks of not formalising your settlement/s. With this advice you can then assess the risks and benefits for yourself and make an informed decision.
My book “Moving On – What you need to know about Separation & Divorce” contains further information about resolving your family law issues and the legal, financial, practical and emotional issues you may face. Feel free to contact me via this blog site to secure yourself a copy.
Nothing in this article is legal advice particular to your circumstances. You should obtain legal advice from an experienced family lawyer as to your particular circumstances.