Signing on the dotted line - the importance of finalising a property settlement

It's not unusual for a client to have a "rough" idea or even have reached an informal agreement with their former spouse as to how their property settlement might be finalised.

When there are significant investments, businesses and various structural entities, parties often reach agreements with the assistance of their accountant or financial advisor. And why not? This person knows their business, its structures and values inside out and is able to give advice on tax effective ways of dividing assets. If the person is a neutral third party they can assist in helping their clients get a long way towards their goal of an "amicable settlement".

At McKays Family Law we encourage our clients to attempt settlement negotiations with the use of third parties, but what we cannot stress enough is that legal advice should be obtained during that process and any agreement should be formalised by way of a Consent Order or Binding Financial Agreement.

There are many benefits to formalising agreements, including the knowledge that your client's matter is over so they can move on financially, and significant Stamp Duty and Capital Gains Tax exemptions/relief. Settlement on the "back of a beer coaster" is not something you should ever advise your client will be binding.

What clients often don't understand is how to "make this happen" and that is where having an experienced family lawyer will help.

We recently had a client attend at our office in a panic because he was supposed to be finalising his property settlement that day and the other party had pulled out at the last minute. When we met with him, it became apparent that an agreement had been reached between the parties, but never formalised. The client wanted to remarry, however the other party had decided that she wanted the property settlement to be "formalised" and was refusing to sign any documents regarding the divorce until this was done. Up until this point, in his desire to reach an amicable agreement, solicitors had never been engaged.

We advised the client that he couldn’t actually do what he wanted to do without a binding agreement, not to mention the fact that the stamp duty payable would have been significant. We were also able to provide advice, which he later relayed to the other party as to the fact that being divorced did not mean that she would lose her entitlement to the property of the relationship (although it would start a time limitation ticking) and as a result she agreed to the divorce without a final agreement in place.

As a result of a 1 hour consultation with us, the client was able to be remarried and the other party was happy in the knowledge that the agreement was going to be finalised and her assets protected from any third parties.

So next time you have a client who wants you to help them "get started" with a property settlement, do, but ensure that they are sent to a family lawyer before the negotiations start, so they can be aware of their entitlements. And always advise your client that they should consult a lawyer, to turn any agreement into a legally binding document.

For further information please contact one of our family law team.