Consent orders or financial agreement: Which one is right for you?
By: Josephine Sergi
Reaching agreement in relation to financial matters following separation is always a more desirable option than litigation and the financial, time and emotional cost associated with that.
However, unless an agreement is properly formalised, there is always the risk that a former partner can come back for a “second bite”. An agreement between parties that has not been properly formalised, even if it is in writing, is not legally binding and is not able to be enforced. Your financial position is not protected, even after assets have been divided, as it is the financial position and circumstances of each party at the time of determination that is considered, not as at the date of separation or at the time of your informal agreement. It is also not possible to split superannuation entitlements unless there is a formal agreement in accordance with the Family Law Act 1975.
Having your agreement carefully and properly formalised is therefore essential, no matter how amicable and trusting you each may be of your former partner at any point in time.
There are two options available to formalise a property settlement following separation:
Consent orders are where the agreement is approved by the court and formalised as court orders.
To have consent orders made, the parties need to make a joint application to the court setting out the financial circumstances of each party. The court must determine the agreement is “just and equitable”, essentially meaning fair in all the circumstances. There is usually no need for parties to attend court. Parenting agreements can also be formalised within the same orders.
Parties do not require legal representation to enter into consent orders, although to ensure the agreement is properly drafted and both parties are advised, legal assistance is highly recommended.
The orders are enforceable if one party fails to comply with the agreement and there are only very limited circumstances where consent orders can be set aside, varied or discharged without agreement.
Applications for consent orders should be made within 12 months of a divorce or within two years of the breakdown of a defacto relationship. Permission or “leave” of the court is required for parties to apply for consent orders to be made after this time.
Financial agreements are private agreements or contracts between parties prepared in accordance with very specific technical requirements set out in the Family Law Act 1975. They do not require court approval or need to be considered “fair” as is the case with consent orders.
Both parties are required to have their own independent legal advice and each party’s lawyer must sign a certificate to confirm this advice has been provided.
In certain circumstances, a financial agreement may be more appropriate if parties wish to extinguish future claims by the other party for spousal maintenance, as consent orders do not provide this certainty. Agreements in relation to parenting cannot be included in a financial agreement.
The terms of a financial agreement are enforceable in the same way as a contract, or a party can apply to enforce the agreement as if it were an order of the court. However, the financial agreement must comply with very strict legislative requirements to be binding and enforceable.
Which option is right for you?
There are advantages and disadvantages to both consent orders and financial agreements. Each family is different and there is no “one size fits all” approach.
The team at Kennedy Partners are able to discuss your personal situation and advise as to which is the most appropriate option for you.