Financial Agreement vs Consent Order
Lately at KLP we have seen an influx in Financial Agreements – also known as Binding Financial Agreements or “BFA’s” - being prepared by other firms. When asking client’s if they are aware why their former spouse has had a Financial Agreement prepared, as opposed to the more common option of Consent Orders, the response is often “the Bank said we just needed something in writing”, “we’re amicable” or “we want something simple”. However, none of these responses answer the question.
So what are these documents?
If you’ve reached an agreement to divide your property with your spouse and want this agreement formalised and legally binding there are two ways to do this – through Consent Orders or a Financial Agreement.
A Consent Order is a written agreement approved by the Court after an Application for Consent Orders and the Consent Orders themselves have been filed in the Family Court Registry. Consent Orders have the same legal effect as an Order made by a Judge after a final hearing even though you never step foot in a Courtroom.
A Financial Agreement – and here we are just talking about Financial Agreements made after and not prior to separation – is a contract which sets out how your property is be divided and involves no intervention from the Courts.
What are the Pro’s and Con’s of each document?
We love visual comparisons and making things easier to understand at KLP so the following table sets out the pro’s and con’s of each document:
Are relatively easy – the Application for Consent Orders is a prescribed document on the Court website. There are usually 2 to 5 documents that need to be filed (depending if children orders are being sought or just property and whether a super splitting order is being sought).
If you are transferring real estate then you will get a stamp duty exemption (which can save you thousands!) and if the real estate was an investment you will receive what is called ‘Capital Gains Tax (CGT) roll over relief’ which means that no CGT will be payable on the transaction and is rolled over to when the real estate is sold to a third party later down the track.
Are sanctioned by the Court i.e. they have to be filed and the Registrar, if satisfied that there are proper arrangements for the children or that the orders sought for a property settlement are just and equitable, will make the Orders and return the sealed orders.
Do not need your signatures witnessed by a solicitor or JP and you do not need to obtain independent legal advice.
As with Consent Orders, if drafted correctly and if you are transferring real estate then you will get a stamp duty exemption (which can save you thousands!) and if the real estate was an investment you will receive what is called ‘Capital Gains Tax (CGT) roll over relief’ which means that no CGT will be payable on the transaction and is rolled over to when the real estate is sold to a third party later down the track.
They are binding and enforceable.
You do require each party to have a solicitor and each party must receive independent legal advice and the solicitor providing that advice must sign a certificate confirming that they have in fact provided that advice.
Because a BFA is never sanctioned by a Court and there is no ‘fairness’ test, agreements that are less favourable to one party can be documented in BFA’s.
Can be entered into if you are outside of the time limitation to file.
There are no limits on what can be included.
They take time and effort to get done right to ensure that they can be enforced.
What is a pro, is also its con - because a BFA is never sanctioned by a Court and there is no legal ‘fairness’ test, agreements that are less favourable to one party can be documented in BFA’s.
Essentially contract you each out of your rights to go to the Family Law Courts – that is a big deal and because of that the documents are a lot more of a technical document to prepare. The end result is not sent to the Court for filing.
Because they are a very technical document, if not prepared properly they may not be binding and potentially could be set aside by a Court if challenged.
Consent Orders - Free if you do them yourself or if you engage a lawyer to assist the costs could be anywhere between $1,100 and $6,600+ – depending on what is involved. There is a filing fee involved which as at 1 July 2019 is $165.
Financial Agreements - You need a solicitor to sign off on the agreement and the costs can be 3 to 4 times that of a Consent Order – easily between $5,500 and $11,000+
Consent Orders - Get a solicitor involved in drafting the actual orders (also referred to as Minutes of Consent, Consent Orders etc.) particularly if there is real estate to be transferred – because the Office of State Revenue wants to see specific words in the orders before they will give the exemptions/concessions and if there is a super splitting order sought – there are specific things that need to occur before signing the Orders and filing them.
For both documents – make sure the Orders have a paragraph that says if some party refuses or neglects to sign a document to put into effect the Orders, then the Registrar of the Family Law Court can sign on their behalf. This will then prevent delays in putting the document into effect.
Financial Agreement - If you want to enter into a BFA make sure you get a solicitor who specialises in Family Law to draft it. We have seen too many badly drafted BFA’s in our time to know that the documents are extremely specialised and not every solicitor can do them. They need to be abreast of the current issues with BFA’s including the current case law as that can give us a lot of information about how to try and make the BFA as binding as possible.
So which document is better?
The document you should use really depends on your specific circumstances BUT given Consent Orders are Court approved, are generally cheaper and have fewer technical requirements they are usually our preference.
A final word of caution, if a Family Lawyer advises that you need a BFA because you’ve reached an agreement amicably OR that they don’t ‘do’ BFA’s because of the risk, you should consider seeing another a lawyer. Your lawyer is there to tell you about the options available to you and advise you on why one option is better suited to you than the other. If you get the right advice from the start you should get the best outcome for the right price.
If you are going through a separation and want to sort out your finances come and see us at KLP Family Law and we can talk you through your options and the best way finalise your property matters.
Where to from here?
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You liked the information, you found it interesting - but that’s all you wanted for now.
This blog post resonated with you but you are just not ready yet to do anything and just want to look at more information about Family Law – I suggest you look at the other Free Information we have on our website which includes FAQ's as well as Helpful Links and Contacts that may come in handy.
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