When Should I do a Property Settlement?
Property settlement is the process of dividing assets, liabilities, and financial resources between separated partners, but when and how should this be done?
It is common for separated partners to divide things like furniture, household items and money in joint bank accounts between them following separation, but this does not bring your financial relationship with your former partner to an end. In fact, even going to the extent of refinancing or paying out joint debts, transferring or selling jointly-owned houses and transferring or selling jointly-owned vehicles, boats, motorbikes etc, so that you and your former partner no longer have any joint assets or liabilities does not formally bring your financial relationship to an end.
To bring the financial relationship with your former partner to an end pursuant to the Family Law Act 1975 (“the Act”) there needs to either be Orders from the Federal Circuit and Family Court of Australia (“the Court”) or a Binding Financial Agreement that complies with requirements of the Act.
If you don’t formalise the property settlement between you and your former partner, even if there has been an informal distribution of assets and liabilities, you or your former partner can still seek a property settlement through the Court.
The Act specifies a time limit for separated partners to seek Orders for property settlement. For married couples, the time limit expires 1 year from the date of divorce and for de facto couples the time limit expires 2 years from the date of separation.
Not obtaining Orders from the Court before the expiry of the time limit may extinguish your right (and your former partner’s right) to seek Orders for property settlement be made by the Court.
The expiry of the time limit does not stop a party from seeking property settlement Orders from the Court in all cases. The Court has the power to grant leave (give permission) for a party to commence property law proceedings out of time (after the expiry of the time limit). It is important to note that when property settlement is done, it relates to the assets, liabilities and financial resources owned by separated partners at the time of when property settlement is done (including assets purchased or debts incurred after separation), not what existed at the time of separation.