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07 November 2018

Moving on? Why it is important to first resolve your property matters with your ex

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I read with interest a recent article, which has caused the alarm bells to ring for many parties involved in family law matters and concerns about the consequences of failing to resolve matrimonial or defacto property matters with an ex-spouse or partner before intermingling finances with a new partner.

While the example set out in the article is atypical, it reminds us that in most cases, it is in your best interests to resolve your outstanding property matters promptly.  This is because the Family Law Act 1975 provides that when determining property matters, the Court must take into account all assets and liabilities in which the parties’ have an interest (whether jointly or separately) as at the date of hearing (i.e. the present date), not the date of separation.  A party to a marriage may apply to the Court for a division of property and/or spousal maintenance at any time up to 12 months after the date a divorce is made final (or in the case of defacto relationships, within 2 years of separation).  Leave to apply outside of time may only be granted in limited circumstances.

What does this mean?

If you do not resolve your property matters, and have acquired significant property interests after separation, then potentially your interest(s) in that property will form part of the property pool available for distribution with your former spouse or partner.  This applies even if you acquired the new interest(s) together with a new partner or spouse.

That’s correct – you may think that physically moving on means that your property with a new spouse is not taken into account.  However, if you intermingle finances with a new partner and for example, purchase a new home together, that asset or assets may form part of the property pool with your former spouse or partner.  Whether your former partner or spouse receives a share of your “new” property depends on each party’s respective contributions to the acquisition, conservation or improvement to any of the property of the parties to the marriage or de facto relationship and non-financial contributions and relevant matters in section 75(2) or section 90SF(3) (whichever is applicable).  The Court must be satisfied that making an Order altering interests in property is just and equitable in all of the circumstances.

The above is a simplistic explanation of the perils of intermingling finances with a new partner before you have resolved your property matters with a former spouse or partner, however it is a timely reminder that:-

  1. You should formalise your property matters with an ex-spouse or partner as soon as possible after separation.  This should be by way of a Court Order so as to ensure that it is legally enforceable and binding on both parties.  Alternatively, you may wish to formalise same by way of a Binding Financial Agreement, which have their own requirements to be legally binding.  A simple verbal agreement or a document that you and your ex-spouse or partner draft and sign together – is not binding and is not enforceable at law.
  1. You may wish to consider signing a Binding Financial Agreement (commonly referred to as a “pre-nup”) with a new spouse or partner to protect your property and financial interests in the event your relationship comes to an end.  Provided the Binding Financial Agreement meets the requirements of the Family Law Act 1975, it will be binding on the parties and can only be set aside by the Courts in very limited circumstances.
  1. There is no substitute for legal advice from a competent family lawyer to pre-empt any adverse consequences after a relationship breakdown.  We know the law and can give you the appropriate advice (and prepare the appropriate documents) to avoid and/or minimise the risks to you in the event your relationship comes to an end.

If we can assist with your family law matter please do not hesitate to contact our office.

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