Separation Agreement or not???

Hi and thanks in advance

Bought a 1 bed investment property with an ex-partner back in 2003 as tenants in common. When we bought the property we were living together in London, UK. We lived together for 1 year. We've been apart for about 10 years now. We have since splitting up let the property sharing everything 50/50. We have always got along and there has never been a problem between us. Everything is happy and amicable. I am in the process of buying her 50% of the property. Everything has been agreed and contracts signed.

My question is that do I need to arrange a 'separation agreement' just in case there any problems in the future?
 
Hi there
you may wish to review the Family Court website
It is possible to have consent orders between parties if you have any concerns.
My feeling that as everything has been purchased as tenants in common - with a 50/50 split and because of the long period intervening (you usually have to act fairly promptly with property settlements) that there is not likely to be any difficulty - certainly have a memorandum of understanding between the parties which documents (and provides evidence) of both parties intentions.
 
An Binding Financial Agreement may help save on stamp duty for the 50% transfer.
I agree with this.

Any transaction will attract stamp duty, and if you want to save the costs, it may be worth doing the Binding Financial Agreement since you were a "couple" 10 years ago.
 
Hi Mickweb,
In relation to de-facto separation unfortunately the courts won’t deal with matters where the parties have been separated for more than 2 years unless you make special application. (not recommended)
A financial agreement would do the job if you wish to document the separation and this has the added benefit of providing the stamp duty relief and a deferral of capital gains tax when property passes from one spouse partner to the other.
There are however a number of rules which must be followed including that each party must receive independent legal advice before executing the agreement. Having a FA drawn up by a law firm won’t be cheap but there are other low cost options.
RP Emery and Associates provide an Australian de-facto financial agreement kit and Document Review Service for less than $1000.00 which is well worth it if you are looking at paying 3.5 - 5% in stamp duty and I dare say you would have some CGT to contend with as well. read more
 
Hi and thanks for the replies

I have just received the information below from my finance broker:

"If you are able to get the Solicitor who is completing the transfer or contract to draft up a letter confirming that the only asset that is owned jointly by you guys is the apartment and that this is just a straight payout to have your ex-partner removed from the title for a certain sum of money. This should be sufficient."

The solicitor advised that the stamp duty payable would be $2,100.

I'm all up for paying as little Stamp Duty and Capital Gains as possible but

Comparing the costs of getting a 'Binding Financial Agreement' v the relatively low stamp duty is it worth it?

Not sure what capital gains issues I should be thinking about in relation to a Binding Financial Agreement?

Many thanks in advance
 
Hi and thanks for the replies

I have just received the information below from my finance broker:

"If you are able to get the Solicitor who is completing the transfer or contract to draft up a letter confirming that the only asset that is owned jointly by you guys is the apartment and that this is just a straight payout to have your ex-partner removed from the title for a certain sum of money. This should be sufficient."

The solicitor advised that the stamp duty payable would be $2,100.

I'm all up for paying as little Stamp Duty and Capital Gains as possible but

Comparing the costs of getting a 'Binding Financial Agreement' v the relatively low stamp duty is it worth it?

Not sure what capital gains issues I should be thinking about in relation to a Binding Financial Agreement?

Many thanks in advance


Great, a broker giving legal advice. Maybe a letter from your mum would help too. Your solicitor should be giving advice on how to get the exemption.

If the property is in NSW then see s68 of the Duties Act.
http://www.austlii.edu.au/au/legis/nsw/consol_act/da199793/s68.html

This will outline the exemptions from duty due to a marriage/relationship break up.
(i) a financial agreement made under section 90B, 90C or 90D of the Family Law Act 1975 of the Commonwealth that, under that Act, is binding on the parties to the agreement, or

(ii) an order of a court under that Act, or

(iia) an agreement that the Chief Commissioner is satisfied has been made for the purpose of dividing matrimonial property as a consequence of the dissolution, annulment or breakdown of the marriage, or

(iii) a purchase at public auction of property that, immediately before the auction, was matrimonial property where the public auction is held to comply with any such agreement or order.

If the property is not in NSW then similar provisions will apply in the relevant legislation of that state.
 
Not sure what capital gains issues I should be thinking about in relation to a Binding Financial Agreement?
It can be very complicated & as Terry suggested, your solicitor should know about these things especially if they're experienced with property settlements after marriage breakdowns.

Here's some more info to confuse you more. http://www.tved.net.au/index.cfm?SimpleDisplay=PaperDisplay.cfm&PaperDisplay=http://www.tved.net.au/PublicPapers/November_2007,_Sound_Education_in_Family_Law,_CGT___Family_Property_Settlements.html

How the CGT is treated could go various ways depending on all your circumstances. I would read the above link, especially the bit about "CGT Rollover Relief" closer to the bottom of page.

Then see what your solicitor thinks.
 
As I understand it the CGT liability simply transfers from one partner to the other when the property is transferred. That is, let say you have a liability between you of $5000.00 now. When the property is transferred then the title holder inherits that full liability if the property were to be sold. Spouse partners would normally make an adjustment for the liability when finalising the Financial Agreement or property settlement.
http://www.ato.gov.au/individuals/PrintFriendly.aspx?ms=individuals&doc=/content/37174.htm
 
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