It is possible to obtain a divorce without a property settlement. Many people believe the term divorce includes all aspects of a family law matter, but this is not correct. A divorce is an order made by the Court that terminates the marriage relationship of the parties. A divorce order does not include orders concerning the property of the parties and does not sever the financial ties of the relationship. A property settlement is entered into independently of a divorce application and is not usually not timed to coincide with a divorce.
A divorce and a property settlement are actually two separate matters. You can apply for a divorce before you reach a property settlement and conversely, you can reach a property settlement and enter into Consent Orders before you apply for a divorce.
Before you decide on which approach is best for your situation, it is important to understand some key issues regarding divorce and property settlements to determine which strategy works best for your particular circumstances.
Eligibility for divorce
To be eligible to apply for a divorce, you are required to have been separated for a minimum of 12 months. You can be separated under one roof, but you will need to provide additional evidence of the separation if this is the case.
Divorce without a property settlement
When a couple separates, there are often many matters that need to be resolved. Coming to an agreement with a former spouse on how to divide your property can be quite stressful. Some people may wish to apply for divorce before they deal with their property settlement.
However, there are risks to this approach which we explore below.
Why you may not want to delay a property settlement
It is usually advisable to address your property matters within a reasonable time after separation. Ideally, you should not wait out the twelve-month separation period to try to settle property matters. The longer you leave addressing your property matters, the harder it can become to reach an agreement.
This is in part because over time your asset pool may change. The approach to property settlement under the Family Law Act is that all assets and liabilities of both parties (called the property pool) are considered at the time a property adjustment order is made, not at the time of separation.
The value of assets post-separation can vary, or additional property may be purchased, or a spouse might receive a windfall such as an inheritance. For example, if you purchase a new home after separation in your own name with post-separation funds, but if you have not reached a property agreement, it would become a part of your combined property pool for consideration at the time of property settlement.
Likewise, one party could accumulate debt post-separation, or the value of the former family home could plummet, which would have a negative impact on the property pool. The current economic conditions caused by COVID-19 illustrate how quickly things can change.
If you or your spouse have interests in a family trust, the assets held by a trust might be able to be more readily transferred to a spouse (even a separated spouse) whereas after a divorce is granted, the transfer of assets from the trust may become more complex. Divorce can also impact on reversionary pensions available to former spouses who hold interests in a defined benefit superannuation scheme. By addressing the property settlement as close to the separation as possible, the property division can be more easily negotiated.
You can come to an agreement about your property at any time after separation, but the longer you wait to resolve the property issues, the more complicated the process can become.
A major part of the financial settlement process is ‘financial disclosure’. This involves sharing all of your financial information with the other party. Full and frank financial disclosure around the time of separation is not usually too intrusive. However, if the disclosure process occurs many months or even years after the separation, it can feel like an invasion of your privacy. This is because you will still be required to disclose to your ex-partner what you earn, what you own, your debts, and perhaps how you have spent your money in the intervening months and years.
The effect of divorce on property settlement
In the event that your divorce becomes final prior to your property settlement being agreed upon, a time limit applies. You will have twelve months from the date of the divorce to commence a property settlement application or reach an agreement and have it formalised. If you miss the deadline, you will need to seek the consent of the Court to make an application for property orders out of time.
If you do not make an application for a divorce, the time limit does not commence.
In summary, you can divorce prior to making a property settlement, or you can finalise a property settlement prior to or without a divorce. We recommend you seek legal advice from a specialist family lawyer before applying for a divorce.
DDCS Lawyers specialise in all aspects of family law and can help guide you through the difficult process of separation. If you need assistance, contact our team on (02) 6212 7600 to book a consultation.