Separation and divorce are difficult times, both emotionally and financially. When you and your partner make the choice to go your separate ways, dividing your shared assets and agreeing on a property settlement is one of the most essential steps to ensure a fair and secure future for you both. However, the process of property settlement can often become complicated and contentious, leading to costly mistakes that can have long-lasting financial consequences.
Why Property Settlements Go Wrong Without Advice
Without the proper legal advice and guidance, many people make errors that could mean they have to spend more money fixing them later, or they might not get the best deal. Whether you’re in the middle of a separation or already in the settlement phase, it’s vital to understand the common pitfalls that can arise.
In this blog, we’ll outline the five most costly mistakes to avoid in your property settlement after separation, helping you to navigate the process with complete confidence and clarity.
Mistake #1: Agreeing to Informal Property Splits Without Legal Binding
One of the most common mistakes people make is agreeing to an informal property settlement without getting it legally documented and binding. Often, couples believe that a handshake agreement or an informal arrangement will be sufficient. However, these agreements have no legal standing and can leave you vulnerable if your ex-partner decides to back out or contest the settlement in the future.
An informal property split may seem like an easy and quick solution, especially if you want to avoid paying for legal support; however, you’ll be leaving yourself open to trouble in the future, and that could leave you out of pocket. Without a legally binding agreement, there is no guarantee that your arrangement will be upheld.
To avoid this mistake, you should formalise your property settlement through a Binding Financial Agreement (BFA) or Consent Orders. These legal tools ensure that your agreement is enforceable and provide protection for both parties. Our property settlement lawyers can guide you through this process and ensure that the agreement reflects a fair distribution of assets depending on your circumstances.
Mistake #2: Underestimating Superannuation and Hidden Assets
Superannuation is a critical asset in any property settlement, yet many people fail to properly account for it during the process. Superannuation is often overlooked or undervalued, especially if one party is not fully aware of its value. Also, because it cannot be accessed until the owner is of a certain age, they don’t always think it’s worth anything to the other party. However, superannuation can form a significant portion of the overall property pool and must be included in the settlement.
Additionally, hidden assets can be another area of concern. One party may attempt to conceal or undervalue assets, which could result in an unfair distribution of property. This can include business interests, offshore accounts, investments, and even valuables such as artwork or jewellery.
To avoid underestimating superannuation and hidden assets, it’s important to conduct a thorough investigation into all financial assets during the settlement process. A lawyer can assist with the discovery of hidden assets and ensure that both superannuation and other financial holdings are properly disclosed and included in the settlement. A professional valuer can help to check and confirm the worth of each asset. Failing to address these assets can lead to a settlement that doesn’t leave one or both parties with their fair and full share of the property.
Mistake #3: Failing to Document Financial Contributions Properly
In a property settlement, one of the key considerations is the financial contributions made by each party during the relationship. This includes money from income, savings, and investments, as well as non-financial contributions, such as looking after the house and any children. However, many people fail to document these contributions properly or at all, which can result in an unfair settlement or one that the court rejects, leaving both parties without necessary protections in place.
If these contributions aren’t documented, it can be difficult to prove their value and impact on the property settlement. This can lead to an unequal or unjust division of assets.
To avoid this mistake, ensure that all financial and non-financial contributions are properly documented. Keep records of receipts, payments, and any other evidence that supports your claim. Our lawyers can help you compile this documentation and present a strong case for a fair distribution of assets based on your contributions.
Mistake #4: Ignoring Tax Implications and Delayed Costs
Tax implications and other delayed costs can have a significant impact on the outcome of a property settlement. Many people are unaware of the tax consequences that can arise from the transfer of assets, such as capital gains tax or stamp duty. For example, the transfer of property or shares between spouses may trigger tax liabilities, which could reduce the value of your settlement.
Also, any delays in the property settlement process can result in increased costs, such as legal fees, maintenance payments, and a potential change in asset values. The longer you wait to finalise the settlement, the more assets that could be added to the pool, and the more complicated the process can become.
To avoid this mistake, it’s essential to seek advice on the tax implications of any proposed settlement as soon as possible. Our lawyers have expertise in property settlements, and they can help you navigate these complexities, ensuring that you understand the full financial picture before agreeing to a settlement. They will also help you submit everything on time so you can avoid incurring financial penalties.
Mistake #5: Delaying the Settlement and Losing Legal Leverage
Delaying the property settlement process may seem like an attractive option for some people, especially if emotions are still high or if there’s a desire to wait for the value of assets to change. However, this delay can be detrimental to your case, as it may result in losing legal leverage and reducing the overall value of your share.
When you delay the property settlement, you risk giving your ex-partner the opportunity to argue that you’ve agreed to an informal settlement or that you’ve been uncooperative. Not to mention that asset values can fluctuate over time, meaning that the longer the settlement takes, the greater the possibility of the value of your property diminishing.
It’s essential to move forward with your property settlement promptly. By delaying the process, you can end up with a less favourable outcome or even lose your share of some assets, even if they originally belonged to you. Our lawyers can help you negotiate a timely and fair settlement, ensuring that you don’t lose out on what you’re entitled to due to unnecessary delays.
Final Thoughts: How a Property Settlement Lawyer Can Safeguard Your Future
The best way to safeguard your future is by seeking expert legal advice from Dam Lawyers. Our lawyers can guide you through the entire process, helping you to avoid costly mistakes and get a fair entitlement.
If you’re currently facing a property settlement after separation, get in touch with us for legal support.
