Top 6 Myths about Separating and Divorce
Myth 1- If we separate I am entitled to 50% of the assets
Possibly the most common myth about separating is that people assume if they separated their assets would be automatically divided 50/50. While this may be the case for some relationships, it is not the case for all people and there is no automatic assumption that a court would order an equal division of your assets. In order to calculate what a person would be entitled to if they separated, the court follows a 4 step formula which involves firstly working out your assets and liabilities that are to be divided. Second, assessing the financial and non-financial contributions that each person has made to the relationship. Third, considering if either party is in need of additional financial assistance in the future, and finally whether the overall division of the assets is just and equitable. Once this formula has been applied the division of assets could be either greater or less than 50% to one person.
Myth 2- The property is not in my name so I don’t have an interest in the asset
All assets and liabilities owned by each person of the relationship is included in the property pool. This is regardless of whether the assets are in both names or owned solely by one person.
Myth 3- The other person doesn’t know I own an asset so I don’t have to tell them
The only way to ensure that an agreement is final and binding is to comply with the law. The law requires that each person in a relationship provide full and frank disclosure to the other person when going through a separation. That means that each person has to advise the other person of all assets that they own, even if the other person doesn’t know about it. If you don’t disclose your assets then any Consent Order or agreement that you reach may be overturned and reopened, and a court can order costs against the non-disclosing party.
Myth 4- We only need to divide the house
The assets and liabilities that are to be divided include ALL of the assets and not just the house. The assets include such things as houses, cars, boats, furniture, savings, shares, superannuation. The liabilities include such things as mortgages, credit cards, car loans, personal loans, lines of credit and tax debts. In order to assess whether a division of assets between 2 people is just and equitable (as required by the law) all of the assets and liabilities need to be quantified and the value of the property being retained by each party needs to be considered.
Myth 5- We can avoid a formal agreement and just write an agreement between ourselves
Any agreement that does not comply with the requirements of the Family Law Act is not binding on any person regardless of whether it was signed by both parties or witnessed by a Justice of the Peace. Therefore any informal agreement between you and the other person cannot be enforced and is a ‘gentleman’s agreement’. The risk of an informal agreement is that one person may pay money to the other intending to resolve the property settlement but there is nothing to stop the other person coming back at a later date and seeking more money because a formal property settlement hasn’t yet occurred.
Myth 6- We can just transfer the property title between us to resolve the property settlement
While there is nothing in the law that prevents a person from transferring the names on the title deed of a property between persons, it does not prevent a person coming back at a later date to seek property settlement pursuant to the Family Law Act. Importantly, if a property is transferred to a person without being pursuant to a Family Law Binding Financial Agreement (BFA) or Consent Order, the transfer will incur hefty stamp duty fees. If the transfer occurs pursuant to a BFA or Consent Order then the transfer will not incur any stamp duty fees.