The two ways to finalise financial matters with your ex-partner are consent orders or a financial agreement.
Both documents are legally binding, but one may be more appropriate than the other depending on your circumstances.
It is important to finalise matters in a legally binding way because informal agreements about the division of assets often collapse.
We have seen unfortunate cases where a spouse has filed a court application more than 20 years after a hand shake division of the assets asking for a different and bigger settlement because their financial matters were never finalised and their ex has prospered and they have not; always to the shock and horror of their ex and, usually, new partner.
What’s the difference between the two documents?
Consent orders are lodged with the Federal Circuit and Family Court of Australia and stamped as a court order. Two documents are filed; an Application for Consent Orders and proposed orders. The Application contains details of both parties’ income, assets, liabilities and super. The proposed orders set out the orders the parties are asking the Court to make.
A financial agreement is a private contract between parties that is not lodged with a court, nor subject to court scrutiny. For the agreement to be binding both parties are required to have their own lawyer provide them with legal advice about the agreement and sign a certificate.
Why choose one over the other?
In most cases consent orders will be appropriate. A financial agreement, however, is likely to be the better option in the following circumstances:
- The deal struck is outside the range of legal entitlements. For the Court to approve consent orders, it must be satisfied the orders are just and equitable. A financial agreement is not subject to the Court’s scrutiny so any deal can be struck, however bad it may be for one spouse.
For example, if a spouse’s legal entitlements are between 65 to 70% of the property pool and they have agreed to a deal where they retain 50%, the Court will not approve the orders. The only way to finalise the deal would be by entering a financial agreement.
However financial agreements must be signed off by each party’s lawyers and, if too outlandish, could be liable to be challenged.
- Spousal maintenance must be dealt with. A financial agreement can include provisions for maintenance or oust the jurisdiction of the Court to make any orders for maintenance. This is less risky than an order for maintenance because the Court can later, upon the application of a party, extend or increase maintenance beyond the original term in the consent orders.
Parties have the option to finalise their property settlement in consent orders and spousal maintenance in a financial agreement.
- There are urgent time limits. Once consent orders are lodged in Court, depending on the registry, it can take weeks for them to be approved. A financial agreement can come into effect immediately upon the parties signing. This may be necessary where parties need an agreement in place and documents signed for tax relief before a looming 30 June deadline.
- A financial agreement provides more privacy than consent orders. It is a private contract between parties and is not subject to the Court’s review, nor is it available on the Court file.
An experienced family lawyer will be able to assist you in determining which settlement documents are more appropriate for you.