So you’ve been separated for a while and you haven’t yet managed to get around to sorting out the property settlement. Life gets busy. You might be operating in a ‘state of denial’ and emotionally unprepared to deal with it. Sometimes reluctance simply stems from the reality that things are so complicated that you ‘just know’ that you will need to pay a lawyer to sort it all out. Whatever your reasons for delaying your property settlement you must know and understand the risks associated with doing so.
Know your time limits: There are time limits in initiating proceedings seeking property settlement or orders for maintenance in the Federal Circuit Court or Family Court. For parties to a marriage this time limit is 12 months and 1 day from the date your Divorce became final (having had to be separated for 12 months to be able to file for Divorce in the first place). For parties to a de facto couple it is 2 years from the date of separation.
When your time limit expires: Should your time limit expire without having finalised your property settlement (or issued proceedings to do so), you will be have to obtain special permission (formally called “leave of the Court”) by way of an interim Order. The Court does not automatically give leave to the parties unless there is merit to do so. For example, if it can be demonstrated that considerable hardship or financial disadvantage will be experienced by either party if these proceedings are dismissed on account of the expiry of the time limitation, it is likely that the Court will allow the Application and then hear it in the usual manner. For maintenance proceedings it will need to be established that at the time the time limit expired you were unable to support yourself without government assistance (an income tested pension, allowance or other benefit).
The Unexpected (or Anticipated) Windfall: Before you delay your property settlement it is critical to understand that the law is very clear that the property pool is assessed at the time of trial (not the date you separate). Supposing you receive a large sum of money after separation (but before a property settlement takes place), this money may form part of the property pool. Windfalls may be anticipated (an inheritance) or they may even be unexpected (lotto wins).
Beware the Risk of Dissipated Assets: Delaying your property settlement can leave you exposed to the risk of dissipated assets. Essentially this happens when one party wastes or squanders assets post-separation. In order to prevent inheriting the impact of your exes poor fiscal choices you will need to prove that assets were indeed squandered on non-essential living expenses (ie demonstrate that your ex really didn’t need extended vacations on the Caribbean). Proving this is the case often leads to long (and expensive) legal battles. Should this be proven the Court will often treat the dissipated assets as a premature distribution of matrimonial property. In other words, the person responsible for the dissipated assets gets less in the final settlement. Alternatively, the Court may increase the percentage split awarded to one party than they otherwise would have received to ensure a just and equitable division of assets. The Court’s approach varies, and there are many schools of thought as to how situations such as these are to be dealt with.
The Risk of Death: Delaying your property settlement can leave you open to other risks should one person die unexpectedly. In this scenario it is no longer possible to finalise property settlement. Instead assets are distributed according to the Will (which you may or may not have updated since separating) or by way of the ownership of the assets. Even in the event that the deceased dies intestate it is possible (and likely) that the surviving (albeit ex-spouse) will benefit from the assets. Such circumstances often give rise to more legal issues under the Probate and Administration Act.
Irrespective of whether or not you have an updated Will, without a property settlement, any assets that are owned as joint tenants (like your marital home) will be automatically transferred to the other joint tenant. Jointly owned assets do not form part of the estate.
While you may have some ‘real’ excuses for delaying your property settlement it is apparent that this should never occur without close consideration of the risks associated with this delay. Property settlements, no matter how tricky, are always best dealt with in a timely manner.