Scenario: You and your former partner have separated. You have agreed how you will split your assets. You don’t think it is worth getting lawyers involved to “legalise” your agreement. Here are three very good reasons why you should.
1. Save yourself some taxes
As part of your agreement, you may “buy” your former partner’s interest in the home. Ordinarily, this transfer of ownership would be subject to stamp duty. In NSW/ACT, a transfer of real property is exempt from stamp duty if it is documented in Family Court Orders or a Financial Agreement. Equally, the transfer of a motor vehicle is exempt from stamp duty if you provide the registry with a copy of your Orders or Financial Agreement.
2. The risk of a ‘second bite of the property pool cherry’
In a classic case of ‘it ain’t over ‘til the fat lady sings’, a property settlement isn’t really over until it is formalised. What happens if you win the lottery, receive an inheritance or obtain a compensation pay out after you have informally divided your assets? Potentially your former spouse or partner could attempt a second bite of the property pool cherry and seek a further division of the property pool. Why take the risk?
3. The time limits
There are time limits under the Family Law Act for formalising, or starting to formalise a property settlement. If you miss the deadline, you may still be able to formalise your property settlement, however you first need leave of the Family Court to do so. This is a further step that can be avoided.