Binding Financial Agreements
The Family Law Act 1975 includes provisions enabling parties to enter into binding financial agreements which set out the division of their assets and liabilities upon separation and can also include spouse maintenance provisions in which one spouse provides financial support to the other.
Parties can enter into binding financial agreements in a number if different circumstances, such as the following:
- in contemplation of marriage (prenuptial agreement);
- in contemplation of a de-facto relationship;
- during marriage;
- during a de-facto relationship; or
- following separation or divorce.
Financial Agreements which are entered into prior to marriage, during marriage or during a de-facto relationship set out the division of property between the parties in the event of separation. Parties are, therefore, giving up their rights to a property settlement pursuant to the Family Law Act 1975 at separation and will divide their assets and liabilities as set out in the agreement.
Binding Financial Agreements entered into in contemplation of marriage or a de-facto relationship or during marriage or a de-facto relationship can provide parties with certainty in the event of the breakdown of a relationship. This can also bring comfort to members of their extended families who may have assisted them financially and can also secure assets for children from prior relationships.
When considering entering into a financial agreement during or in contemplation of a de-facto relationship or marriage, parties should consider the following:
- are they intending to marry?
- will each party retain any assets received from family members including by gift or inheritance?
- will each party retain the assets they owned at the commencement of the relationship or agreement?
- how will they divide property accumulated during the relationship?
- will the division of property change in the event that they have children?
- will the division of property change in the event that their relationship is more than say, ten years in duration?
A financial agreement following separation or divorce sets out the division of assets and liabilities between the parties held at that time.
Requirements of binding financial agreements
There are strict legal requirements for a financial agreement to be legally binding. Some of these requirements include:
- the agreement must be signed by all parties; and
- before signing the agreement each party must be provided with independent legal advice in relation to the impact of the agreement on their rights and the advantages and disadvantages, at the time the advice was provided, to that party of making the agreement; and
- a statement by the respective parties’ legal practitioners must be signed confirming that the required advice was given and a copy of the statements must be provided to the parties; and
- the agreement must not have been terminated and must not have been terminated by the Court.
A binding financial agreement can be terminated by agreement by the parties. The termination of the agreement must be in writing and satisfy the same requirements as entering into a binding financial agreement. The parties can also terminate the agreement by entering into a new binding financial agreement which includes a provision to terminate the earlier agreement.
A party can apply to have an agreement set aside in certain circumstances. There has been a recent case of Thorne v Kennedy where the High Court set aside a prenup and post-nuptial agreement on the basis that he husband had exercised undue influence and acted unconscionably inducing the wife to sign the document.
It is so important that you get good legal advice and that your lawyer has considered both the technical requirements and current cases.
If you would like more information about binding financial agreements, either about entering into one or seek advice about setting one aside please contact our experienced family law team for an initial fixed fee consultation.