Attwood Marshall Lawyers Consulting Family Law Special Counsel Michael Twohill joins Robyn Hyland for “Law Talks” on Radio 4CRB to discuss the main issues people should prepare for when they separate from their spouse, but have not yet finalised their divorce.
Introduction
To apply for divorce in Australia, couples must be ‘separated’ for at least 12 months. There is a whole issue about what the definition of being separated for 12 months looks like, including living under the same roof and one-off attempts at reconciliation, but usually most couples are physically apart for the prescribed 12 months and can apply for the divorce. Interestingly, however, many estranged couples opt to delay the formal divorce process, and some even choose to remain married but separated indefinitely – otherwise unofficially referred to as “undivorced”.
The reasons behind such decisions are as diverse as the individuals themselves. Some people grapple with uncertainty, holding onto a glimmer of hope for reconciliation in the future. At the same time, others find themselves at a crossroads between their desire to move on and wanting to respect their religious or cultural beliefs that may advocate against divorce. Then, some may feel daunted by the process and delay completing the final divorce paperwork.
Whatever the reason, there are specific considerations separating couples should speak to their lawyers and accountants about once they decide to split.
Top five legal issues separated couples should understand
1. Property division and settling financial matters
The best way to resolve financial matters during separation is to strive for a mutually agreeable arrangement with your former spouse that is fair and reasonable for both parties.
Property settlements can be achieved through productive negotiation, mediation, or both. If former couples reach a satisfactory agreement, they can formalise the arrangement by entering a Binding Financial Agreement (BFA).
A Binding Financial Agreement is a legally binding contract that comprehensively outlines how the parties will divide property and assets while addressing various financial considerations.
Notably, BFAs can be initiated at any time; before a relationship gets serious, during the relationship, or after separation, and in the case of married parties, either before or after your divorce.
The benefits of entering into a Binding Financial Agreement are vast. Firstly, it can spare you the expense and time of protracted court proceedings. Furthermore, these agreements are adaptable to your unique circumstances, allowing you to craft an arrangement that aligns with your comfort and sense of fairness.
Letting a court make the final determination may lead to an outcome that doesn’t align with your expectations, resulting in a diminished sense of control over the final resolution. It can also become a costly legal experience!
2. Spousal Support
Spousal support can be dealt with when negotiating a Binding Financial Agreement. The agreement can address spousal support in various ways, including:
- Excluding spousal support altogether,
- Specifying a one-time lump sum payment of spousal support,
- Designating periodic spousal support payments,
- Determining a set period for spousal support, such as until dependent children reach a certain age or,
- Stipulating spousal support to be paid until one spouse enters a new relationship or marriage, for example.
However, if you choose not to enter into a Binding Financial Agreement, there are other avenues to address spousal support, though they come with different considerations:
- Informal agreements: you may enter into an informal agreement – this is not recommended because if one party to the agreement decides not to uphold their end, there is nothing legally binding in place to enforce the arrangement.
- Mediation: a neutral third party (the Mediator) helps you and your former partner communicate and negotiate a settlement agreement. The best results are usually achieved when the parties are both legally represented at the mediation by lawyers who practice exclusively in family law and with the assistance of a qualified mediator.
- Arbitration: If mediation is unsuccessful, arbitration is often the next step. A neutral third party (the Arbitrator) decides on your behalf regarding spousal support after being presented with all the evidence. Arbitration is generally a faster and cheaper way to resolve financial disputes than going to court. It is important to note that the decision of the arbitrator is binding. Again, this may not be a decision you think is fair or is what you were hoping for. If you and your former partner cannot negotiate and communicate effectively, this is likely where you will end up, if not in court.
- Court: If all else has failed, the final option is court proceedings. If you and your former partner cannot reach an agreement, you may need to go to court to have a judge decide for you. Court proceedings can be extremely costly and time-consuming, not to mention emotionally draining. Therefore
,we always encourage you to try to reach an agreement with your former partner at the earliest opportunity to avoid ending up in court. In some cases, it may be necessary to commence court proceedings and seek urgent interim spousal maintenance orders pending the final determination of your application for property and spousal maintenance orders. In many cases where an interim application is filed, the parties can agree to interim consent orders to cover the interim payment issue on the basis that part or all of whatever the applicant receives pending the outcome is determined by the trial judge as spousal maintenance or a partial property settlement.
3. Child support if there are dependent children
Just like resolving financial and property disputes, there are several ways you can agree on child support.
You can choose to follow the standard formula set out and delivered by Services Australia, which uses calculations based on the following:
- The income of both parents
- The number of children to support
- The percentage of time each parent spends caring for the children and
- Any other relevant factors, such as the cost of living (which we know is a big issue for many families now).
Alternatively, you could come to an informal agreement. The same warning applies; this is not a recommended strategy. If a dispute arises in the future, and one parent stops making payments, you may need to go to court to resolve the matter. It is best to formalise the agreement early and avoid making informal arrangements.
Mediation or arbitration are also options available.
The best way to resolve child support issues will vary depending on family’s individual circumstances. Getting legal advice from an experienced family lawyer is always best to understand your rights and obligations and the best path forward. If you sign a Child Support Agreement, a copy of the signed agreement will need to be sent to Services Australia.
4. Estate Planning
One of the most crucial considerations for separated couples is the immediate need to update their Will, Enduring Power of Attorney, and related estate planning documents upon separation.
This process may involve altering the instructions in your Will, revoking an Enduring Power of Attorney document that might have your former partner appointed as your attorney, and revising your superannuation death benefit nominations (particularly, a binding death benefit nomination).
Many individuals overlook the fact that their existing Will remains legally valid while they are separated but not yet divorced. Consequently, if an unforeseen event occurs and your Will has not been updated, it could result in your estate being inherited by your former partner. Additionally, your former partner might be designated as the executor of your estate, which can be problematic, especially if the separation was contentious.
This same issue extends to Enduring Powers of Attorney of an Appointment of Enduring Guardian. If you have an existing Enduring Power of Attorney that designates your former partner as your attorney and you lose capacity, they will have the authority to make financial, health, and personal decisions on your behalf.
Given the potential complications in situations involving bitter relationship breakdowns, updating your estate plan as soon as possible following separation is essential. In most cases, you may not want your former partner making your financial, health or personal decisions for you once you are separated.
Another consideration is to sever the tenancy of any property you may hold jointly with your former partner. If you hold the property as joint tenants and either of you pass while you are separated, then by law, the property will automatically pass to the former partner by survivorship.
It is critical to sever the joint tenancy and transfer the holding to tenants in common in equal shares upon separation. You do not need the other party’s consent to do so, and a competent lawyer can affect the paperwork and register the severance in a few days.
This will ensure that your interest in the property will remain in your estate for distribution in accordance with the terms of your Will if something unexpected happens.
When people go through a break-up, updating their estate plan is likely the last thing on their minds. However, understanding the consequences of not updating these documents early in the piece is incredibly important.
5. Taxes and Centrelink benefits
Separated couples can choose to file their tax returns jointly or separately. If they file jointly, they will be taxed as a single unit on their combined income. If they file separately, they will each be taxed on their income.
There are several advantages and disadvantages to filing jointly or separately, so it is always best to discuss your situation with your accountant to know the best option. Some couples may have a complex company and/or trust structure in place at the time of separation and it is essential to seek legal and accounting advice on those issues sooner than later.
As for Centrelink benefits, separated couples may be eligible for different Centrelink benefits than they were eligible for when they were married. It is important to contact Centrelink to find out what benefits you may be eligible for and to take steps immediately to get answers to any questions you may have.
For the older members of our community, this can become very important as their financial details may change significantly upon separation, affecting the payments to be received from Centrelink.
Attwood Marshall Lawyers – helping families resolve disputes with as little conflict as possible
Attwood Marshall Lawyers have a dedicated team of family lawyers who practice exclusively in this complex area of law.
If you are going through a separation or divorce, make sure you get trusted legal advice to understand the steps you need to take to protect your best interests and help your family move forward.
Our family law team is experienced in all facets of family law and can assist with children and parenting matters, drafting binding financial agreements, negotiating property settlements and finalising your divorce.
If you need assistance, please don’t hesitate to contact our Family Law Department Manager, Donna Tolley, on direct line 07 5506 8241 or email dtolley@attwoodmarshall.com.au. Our team are available at any of our conveniently located offices at Robina Town Centre, Coolangatta, Southport, Kingscliff, Brisbane, Sydney, and Melbourne.
