The Family Law Act 1975 allows parties in either a marriage or a de facto relationship to enter into what is known as a Binding Financial Agreement.
A Binding Financial Agreement allows parties to reach a private agreement with respect to the management of their finances during the course of a relationship as well as the division of assets and the financial obligations to one another in the event of a relationship breaking down.
Here, we’ll discuss everything you need to know about prenuptial and financial agreements, including the requirements, things you can include and reasons why the court may set them aside.
When can I enter into a Binding Financial Agreement?
Parties in a relationship wishing to have control over what happens to their assets if they separate can enter into a financial agreement at any time during their relationship, including:
- When they plan to marry (a prenuptial agreement) or plan to move in together;
- While they are in a de facto relationship or are married (a cohabitation agreement);
- Before or after they separate or divorce (a separation agreement).
Who do Binding Financial Agreements suit?
Prenuptial or Financial Agreements made prior to moving in with a (new) partner are often popular with people who are entering a second marriage or relationship. This is because many of these people want to protect the assets they retained from their first marriage or because they have experienced the stress that a relationship breakdown and a property settlement can have where an Agreement has not been reached beforehand
Financial Agreements are also a popular choice when there is a desire to quarantine an inheritance or other family assets from a new partner. As a result, they are also a very useful tool in family businesses and succession planning.
Similarly, a Financial Agreement is useful if one party has a more substantive income or assets that the other party when the relationship begins, and they want to protect that from the other party in the event of a relationship breakdown.
Although prenups in Australia are particularly popular in certain instances, they’re useful for all sorts of relationships.
This is because they provide both parties in the relationship with certainty, finality and security.
Both parties know that if the worst-case scenario occurs and the relationship breaks down, then their future financial arrangements and the division of assets has already been decided. This can save parties a significant amount of time and money as they will not need to engage a lawyer to negotiate an outcome for them or to go to court.
What are the requirements for a Financial Agreement to be binding?
In order for your Financial Agreement to be legally binding, each party must first receive specific independent legal advice.
The Agreement must also:
- Be in writing and signed by both parties;
- Be between two parties who are either contemplating entering a marriage or de facto relationship, are in a de facto relationship or marriage, or have separated or divorced;
- Include a statement stating that both parties have received legal advice before entering into the agreement about:
- the effect of the agreement;
- the advantages and disadvantages of entering into the agreement; and
- their likely entitlement under the Family Law Act;
- Come with a statement from each party’s legal practitioner certifying that the above legal advice was given;
- Have a copy of each legal practitioner’s statement that was given to the other party or their legal practitioner; and
- Include a separation declaration (unless signed post-divorce).
What should a Binding Financial Agreement include?
Most Financial Agreements cover things like the distribution of property, debts, spousal maintenance and other financial matters. Generally speaking, financial agreements cover all assets, liabilities and superannuation interests of the relationship or of the parties. Financial Agreements entered into prior to a marriage or de facto relationship can also include assets that were brought into the relationship
Depending on what type of Financial Agreement you are entering into, you will need to provide instructions to your lawyer as to:
- the current value of the assets, liabilities and superannuation interests you and partner each have;
- what contributions you made to the acquisition of those assets;
- whether you have or intend to have children together (and what the anticipated care arrangements will be);
- what your respective incomes are;
- how you wish for your assets, liabilities and superannuation interests to be divided in the event of separation; and
- how you wish for spousal maintenance to be dealt with in the event of separation;
Can my Binding Financial Agreement be set aside?
If your Financial Agreement does not satisfy the above criteria, then it may be possible for a court to set it aside.
A court may set aside a Financial Agreement when:
- The agreement has been obtained by fraudulent means;
- It is deemed that one party acted in an ‘unconscionable’ manner when creating the agreement;
- One party has entered the agreement with the aim of defrauding a creditor;
- The agreement is either void or unenforceable because it does not comply with the legislation;
- It is impractical or impossible to carry out the binding financial agreement because the circumstances have changed significantly since it was signed;
- A ‘payment flag’ is operating on a superannuation interest covered by the agreement;
- The agreement covers a superannuation interest that is deemed to be an ‘unsplittable interest’.
For this reason, it’s vital that you speak to an experienced lawyer before you contemplate entering into or sign any proposed Financial Agreement.
Contact us to learn more about Prenuptial and Financial Agreements
If you are considering entering into a Financial Agreement, it is critical to obtain expert family law advice before you begin the process. Our lawyers have significant experience in drafting and advising on financial agreements and we can help you through every stage of the process. To book an appointment with one of our experienced lawyers, please call us on (07) 3837 5500 or get started online.