Many people try to settle family law property settlements without formalising the arrangements. One may choose to “pay out” their ex-partner in an informal arrangement without obtaining court orders or making a Binding Financial Agreement.
Informal arrangements are fraught with danger, however. Consider the following hypothetical situation. John had separated from his wife a few years ago, however he has yet to get around to getting a formal divorce. At the time they separated John made a lump sum payment to her to “buy out” her share of the house, being the main asset of the relationship. They both believed this figure at the time to be reasonable. They did not obtain consent orders from the family law courts, however, nor did they put a Binding Financial Agreement in place.
Now John has received a letter from his ex-partner’s solicitors. She has found out that he has received a substantial inheritance (this is true – John recently received $200,000 following the death of one of his parents), and the value of the house they lived in has increased over the couple of years since separation by about $100,000. His ex-partner wants a share of the inheritance and the increased value of the home.
You think it sounds unfair for her to come back for a “second bite”? Think again. Under family law the value of the asset pool at the time of court hearing is controlling, not time of separation. Post separation assets can be taken to be included in the pool in some situations.
Under this hypothetical, at the end of the day John may be able to keep the majority – but probably not all – of the inheritance, however this will depend on many factors including his ex-partner’s future needs.
The value of the marital home is also more than likely to be considered at the time of court hearing, rather than at the time of separation, meaning John may be liable for a significant extra amount to his ex-partner.
Imagine how much angst and additional cost John could have saved by properly formalising a settlement at the time of separation?
Taking a shortcut may seem like it saves time, stress, and money in the short term, but in the long run can end up costing you significantly more. It’s always best to get a lawyer to assist you in sorting out your property settlement and making sure a “final settlement” is in fact a final settlement.