I’ve ended my relationship, what else do I need to know?
When people separate from their partner, they tend to think that that is the end of everything and they can move on with their lives, but what they don’t realise is that they may need to formally end their financial relationship.
What is a financial relationship?
A financial relationship is an ongoing legal and financial interconnectedness between former spouses or de facto partners, that, as many parties have been surprised and sometimes concerned to discover, continues to exist even after the parties have separated.
What this means is, that unless you take steps to end your financial relationship with an ex-partner, your ex-partner could bring family law proceedings against you years down the line to end the financial relationship and that any assets you have acquired post separation would form part of the property pool that is being litigated. In the worst-case scenario you could have re-partnered, bought a home together and then have your ex-partner come after the home. For example, in the 2021 case of Lambertson & Lambertson, the wife successfully brought an out-of-time application for property orders 11 years after separation. You can read more about that particular case in our FAQ's About Your Property Law Settlement - How long can I Wait? Do I really Need Court Orders?
How do you end a financial relationship?
A financial relationship can only be severed in one of three ways, by entering into consent orders, entering into a binding financial agreement or by litigating your property matter and having the court make final orders.
1. Binding Financial Agreement
A binding financial agreement (“BFA”) is a legal agreement between you and your partner where you set out what assets and liabilities you both have, what happens to those assets should your relationship breaks down and what happens to any assets that are acquired in between you entering into the BFA and the relationship breaks down.
BFAs can be made before you enter into a relationship, during the relationship or even after a relationship has broken down. There are several key conditions of BFAs that people are unaware of,
You and your partner must each have separate lawyers, as both of you having the same lawyer could cause a conflict of interest and could result in the BFA being challenged and overturned later down the line.
Both you and your partner must receive independent legal advice from separate lawyers, so you both fully understand the pros and cons of the BFA
Both your lawyer and your partner’s lawyer must provide a signed certificate explaining what they have advised you on before the BFA can be signed.
It is highly recommended that you and your partner exchange financial disclosure as not doing so could result in the BFA being challenged and overturned later down the line.
Unless you have already separated, A BFA must have a separation declaration, meaning that the BFA does not come into effect until the divorce/relationship breakdown occurs.
2. Consent Orders
If you and your partner have reached agreement about financial and property matters, you apply to the Federal Circuit and Family Court of Australia (“FCFCOA”) to make orders by consent to make your agreement legally binding. The FCFCOA will consider the orders you and your partner are seeking and will consider whether the financial and property orders sought are just and equitable. Unlike with BFAs, self-represented parties can apply for consent orders without requiring an independent legal advice, though it is advisable to have legal advice as it will help reduce the chance that your consent orders will be rejected for being unfair or inequitable.
As Consent Orders are made via the FCFCOA, the parties are legally required to have exchanged financial disclosure.
3. Court Orders
In the event that you and your partner are unable to agree on how your property should be divided, you may have no choice but to commence property proceedings in the Federal Circuit and Family Court of Australia, and have the Court make orders on the distribution of your property. Litigation in the Federal Circuit and Family Court of Australia can be an expensive, stressful and drawn-out process, and tends to be the last resort, when parties are unable to come to any form of agreement.
Under the current family law legislation, parties to a marriage have 12 months after the divorce to begin property proceedings, while individuals in a de-facto relationship have 2 years to begin property proceedings. If you don’t bring begin property proceedings during the provided timeframes, you will need to bring an application out of time and explain to the court why you didn’t do so within the provided timeframe and why you should be permitted to bring your application out of time.
What if we can agree and we just divide up our assets – we don’t need lawyers, Orders or a BFA.
This may be well and good, but more recently we became aware of a matter where one of the parties refused to enter consent orders at the time of separation and the parties informally divided up the property pool between themselves as one party would not sign consent orders. The parties then moved on, re-partnered, bought new houses, set up new businesses and even extend their families. Fast forward a few years and the party who refused to sign the consent orders brought out of time proceedings. The court decided to allow these proceedings and as a result, all of the new properties and assets form part of the global property pool of the unfinalized former marital pool. As you can imagine this is a shocking situation.
It is essential for peace of mind and security of assets that the financial relationship be severed in one of the ways listed above so that this cannot occur. The best time to end a financial relationship is shortly after separation, the second best time is now.
This update is general in nature and is not legal advice. If you need help dealing with a parenting dispute or require assistance with a family law matter, at Voice Lawyers, we hear you.
If you are experiencing or contemplating separation, we suggest you seek legal advice as early as you can, even if you do not intend to separate for a few months or even years. We offer a 90 minutes early separation strategy session Voice Lawyers — Divorce, Separation and Family Law to prepare and inform clients of the process. Every family’s situation is different, and advice tailored to your specific circumstances can assist you in achieving your best possible outcome. We can assist if you would like a second opinion.
We help people navigate the complexities of family law with confident, practical advice. You can contact us at office@voicelawyers.com or call 02 9261 1954 to book a consultation to speak with one of our lawyers.
By Kayte Lewis & Enda Byrne