Financial Agreements – why consider them before marriage or entering a de facto relationship?
Financial Agreements or ‘pre-nups’ have been written about in the press and many comments made in social media. They warn couples against entering into these agreements either before marriage or before entering into a de facto relationship.
It is important for us to recognise and address the risks associated with entering into financial Agreements. Provided the ‘pre-nup’ or Financial Agreement is drafted properly, advice given by a suitably experienced lawyer, and meets the requirements under the Family Law Act 1975, Financial Agreements can be extremely advantageous.
The main benefits of entering into a Financial Agreement include:
- it provides certainty in relation to property matters and spousal maintenance obligations;
- it provides certainty regarding ownership and retention of property. This certainty is critical where families want to transfer their wealth to their children and where family businesses require protection;
- it can protect assets which may be inherited prior to and/or during the relationship;
- it can protect the assets of one party where there is a significant difference in the wealth of the parties;
- it avoids future financial loss due to legal fees and other costs associated with stressful and often bitter disputes contested in the Family or Federal Circuit Court of Australia;
- it recognises the initial contributions of each party and clarifies the ongoing financial obligations of each party;
- it can give greater weight to contributions made before and/or during a relationship by a high income earning spouse than might be recognised under the Family Law Act 1975. Under this Act contributions made by a high income earning spouse can be offset by other factors (e.g. contributions as a homemaker or parent);
- it recognises gifts or settlements made by one party to the other before or during the marriage and ensures that they are taken into account in the event of a separation;
- it can protect the interests of a party who feels their interests will be better protected in a formal agreement rather than taking the risk of wide discretion available to the Court under the Family Law Act 1975;
- it enables a speedy resolution of financial matters at the end of a relationship, as the terms of settlement have already been agreed upon in advance; and
In second marriages/relationships, it:
- has the ability to protect prior assets;
- has the ability to ensure that children of previous relationships inherit prior assets; and
- can be made binding on a person’s estate.
Additionally, many of our clients who have opted for a Financial Agreement have reported that:
- it promoted better long term communication in the relationship. It generated early discussion and clarified each party’s priorities and financial expectations in relation to matters such as children and employment;
- it demonstrated to the parties that they had no secrets from one other;
- it gave the parties peace of mind that their contributions and/or inheritances would be taken into consideration as opposed to being subject to the view of the Court;
- it removed source(s) of stress, particularly in second marriages or where there was pressure to protect family assets. Financial Agreements set out the terms of settlement in advance of a relationship breakdown; and
- it gave each party greater certainty and control over their future financial affairs.
Financial Agreements have strict requirements that must be met before they can form a binding agreement between the parties.
It is therefore imperative that independent legal advice is obtained by each party to the agreement, by a qualified and experienced family lawyer.
To obtain further advice from one of our experienced family lawyers, please contact the team at Damien Greer Lawyers.