The Risks of Informal Property Settlements

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By Jacquelyn Curtis

How can I get my name off a joint home loan? How can I get my ex partner to surrender the card to the credit card account? How do I have my car signed over to me when my ex has the registration papers? How can I get my personal belongings back from my ex?

If you have encountered any one of these scenarios, then chances are you have not had a formal property settlement with your ex-spouse.

As part of separation and divorce, a “property settlement” is where assets and liabilities are divided between spouses after a break up. It is an entirely separate and additional process to getting divorced. You could even be divorced already and still not have had a property settlement.

A property settlement is designed to tie up all of the loose ends between you and your former spouse (including former de facto spouses) in relation to property and financial matters. A property settlement can provide for the transfer or sale of assets including real estate, shares, motor vehicles, artworks and so on.  It can also divide household contents and even specify which person is to keep the family pet!

Sometimes we see clients who informally agree upon how to divide assets and liabilities at the time of separating, but who do not do anything about legally recording that agreement. That can sometimes lead to nasty surprises down the track – such as being declined for a loan because your name is still on the mortgage you had with your ex years ago and did nothing about. Take that scenario one step further – imagine if your ex stopped paying that mortgage and the bank then came looking to you to pay arrears! Take it from us, the bank won’t be too sympathetic when you tell them you haven’t lived in the house for umpteen years and it was meant to be your ex’s responsibility to pay the loan. Or here’s another example, imagine you kept the property and some years down the track you decide to sell. Unfortunately because your ex is still on the title and mortgage, you now need to track him or her down and obtain their assistance to move forward with the sale. This might be easier said than done.

Other than practical problems such as the above, not having a property settlement or not recording a property settlement legally can have consequences for your future financial security, your next relationship and even your estate. Although time limits apply, exceptions are available which enable applications for property settlement to be made years after separation. This may mean you could be on the receiving end of a claim against your superannuation, or even assets you have accumulated since separation, down the track. A formal property settlement can shield you from that possibility.

Even if you think you and your spouse did not have any assets when you were together, think again. If you have been working, both of you will have earned some superannuation during the course of your relationship which may need to be dealt with. Or perhaps you have joint debts that need to be apportioned between you. Relying solely upon a promise that they will be paid out by the other party could put you at risk of debt recovery proceedings if the other party fails to keep their word.

For peace of mind as well as protection against future issues, it is wise to formally document any agreement you may have made or be thinking about making. For assistance, please contact us on (02) 6212 7600 or at