Family Law

The risks of informal property settlements

B2B Editor13 November 2015

The risks of informal property settlements

“It may be tempting when you separate simply to sell up and divide what you have. Sometimes people enter into what we refer to as an interim (temporary) agreement to divide some of what they have (for example, the proceeds of sale of a matrimonial home) and deal with other matters (for example,superannuation) later.

There are risks of both final and interim informal arrangements.

Final settlements

The risks of entering into informal final settlements (that is, without Consent Orders or a Binding Financial Agreement (BFA) properly entered into under the Family Law Act) are:

1. An agreement which is not properly formalised is not binding, and cannot be en forced.

2. Your former partner may make a claim under the Act later. There are limitation periods but a former partner can apply for leave out of time. We have dealt with cases where leave has been granted to start proceedings 12 years or more after the limitation period has expired.

3. The assets and liabilities which you build up following separation will be taken into account in later proceedings.

4. You cannot split superannuation informally.

5. Duties and taxes may be payable unless transfers are done under Orders or a BFA.

Interim settlements

While the risks above are relatively well understood, people are generally less aware that there are also risks of interim settlements:

1. If you distribute funds (for example, the proceeds of sale of a home),it may be difficult to get your former partner to engage in further negotiations (for example, to divide superannuation). You may end up having to start Court proceedings to get a fair outcome.

2. Your former partner may spend some or all of what they receive, and this will not necessarily be taken into account in the final property settlement.

3. You may divide assets between you in a way which does not reflect a fair outcome and it may be harder to achieve a better outcome if you have an informal “agreement”.

When you separate both of you will usually need some funds until you are able to reach a property settlement. Decisions to release and share significant funds on an interim basis should be made carefully, and legal advice is recommended. If a house is to be sold prior to a formal property settlement then it is usually recommended that the proceeds be held in a secure way until the final property settlement is formalised


Dr Juliet Behrens is Senior Associate at firm at the firm
18 Kendall Lane, New Acton Canberra City ACT 2601
T: (02) 6212 7600 E: [email protected]