An agreement of separation is a financial agreement that formalises property settlement between two separated parties. Under family law, we also refer to an agreement of separation as a separation agreement or binding financial agreement in some instances.
It is important to note that this is a legally binding agreement. Therefore, before you enter into such an agreement, you should be aware of your rights and obligations. In this article we go over certain points in relation to an agreement of separation such as the purposes of the document and the benefits of using this.
Purposes of Agreement of Separation
Primarily, the written agreement of separation outlines how division of assets is to take place once parties separate or divorce. While you can come up with negotiations yourselves, it is always better to formalise or legalise these agreements. This is why an agreement of separation is useful.
While some parties make an informal financial agreement, others wish to apply for consent orders that are legally enforceable.
It addresses how jointly-held interests will be divided between two parties. People often forget that it is not just existing assets that couples make decisions about, but also incomes and assets that are yet to come into being. For example, parties may also have discussed what is to happen with their pensions, payouts or long-service leave entitlements.
Benefits of a Separation Agreement
In this section, we will look at the benefits of a separation agreement. Firstly, it is clear that it offers separated parties some level of financial certainty. This is important because after a divorce or separation, the financial circumstances of both parties change a lot.
It is quite possible that the parties were financially dependent on each other, or one party was entirely dependent on the other.
In either case, a separation or divorce can lead to tremendous changes and affect parties to a great extent. This is why it is necessary for them to know exactly how much they will receive from the asset pool. This can help them have some level of certainty, and it can also help them plan for their future.
Moreover, it offers parties the opportunity to come up with their own agreements to divide their assets. If negotiations fail, parties have to attend family court that is both costly and time-consuming. Therefore, if they are able to reach amiable agreements they can stay out of court.
Furthermore, through this, separated or divorced persons can ensure that they prevent any unnecessary disputes or conflicts from arising in the future. It is no surprise that divorce and separations are stressful in itself. To add to this stress, matters around property settlement only make the stress worse.
Therefore, engaging family lawyers, seeking independent legal advice and chalking out mutually agreeable documents to finalise property settlement can help manage stress.
When to Use an Agreement of Separation?
An agreement of separation can be of various types. Some parties prefer to enter into a separation agreement before they enter into a relationship. This is a prenuptial agreement or a prenup.
Similarly, one may wish to enter this even during the course of their relationship, that is before you have separated or divorced. While this may seem absurd, it is always beneficial to be prepared for the worst.
Finally, parties can make such agreements after they have separated or divorced. Many opt to make binding financial agreements to outline and legalise division of assets.
Factors to Consider When Making a Legally Binding Document
The Family Law Act (FLA 1975) outlines certain factors and guidelines in relation to agreements of separation. It states that all financial agreements must comply with these strict guidelines below:
- The agreement must be in writing, and all parties must sign it.
- Each involved party should have received independent legal advice before signing the agreement.
- Only a lawyer in the Australian jurisdiction can provide this legal advice.
- Each involved party should sign the agreement voluntarily, i.e., they should not act under duress or because of undue influence.
- The agreement should contain complete disclosure (full and frank disclosure)
Importance of Seeking Advice from Family Lawyers
If you wish to prepare a financial or property agreement before your relationship, during your de facto relationship or after it has ended, you should obtain advice from family lawyers. Prenups are very important as they eliminate the prospect of unnecessary disputes arising in the event of a separation or divorce. Financial separation can otherwise be riddled with conflicts.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.