What is a binding financial agreement?
A binding financial agreement is a written agreement between a married or de facto couple about how their property and financial resources will be dealt with if they separate.
An agreement can be entered into before marriage, or, before you start living together. This type of agreement is commonly referred to as a pre-nuptial agreement.
An agreement can also be entered into after a couple have married or begun living together.
Some couples enter into a binding financial agreement after they have separated or divorced to record the terms of the property settlement that they have agreed upon.
Do I need a binding financial agreement?
One of the main advantages of a binding financial agreement is that it creates certainty in relation to how your assets and liabilities will be divided should you separate.
If, after separation you and your partner are unable to agree on a division of property, this could give rise to disagreements about contributions, the value of assets and whether there should be compensatory payments made for future needs.
It also means assets such as those owned before the relationship commenced, or, inheritances or gifts received by you during the relationship may be included in the pool of assets to be divided, which is an outcome you may not want, or, may not have intended.
Disputes about property settlements can lead to expensive and stressful litigation and is something most couples would like to avoid. A binding financial agreement can therefore assist you to avoid such a scenario.
Some of the advantages of a binding financial agreement are:
- you can keep separate assets you owned before the marriage, or, de facto relationship such as a home, a business, assets in a Family Trust ,or, a superannuation fund;
- you can protect assets you may want to leave in your Will to your children or grandchildren from a previous relationship;
- you can limit the amount of ongoing financial support you may have to pay your spouse or partner after separation;
- you can provide for property inherited or gifted to you to be kept separate.
Is a financial agreement really binding?
The following statutory requirements must be complied with for an agreement to be binding:
- the agreement is in writing and signed by all parties;
- before signing the agreement each party was provided with independent legal advice from a legal practitioner as to the effect of the agreement on their rights and about the advantages and disadvantages of entering into the agreement at that time;
- each party received a signed statement from their lawyer that the advice above was given, and a copy of that statement has also been given to the other party or their lawyer; and
- the agreement has not been terminated or set aside by a Court.
There are certain circumstances in which a Court will set aside an agreement even though the statutory formalities may have been complied with. These circumstances can include fraud, non-disclosure of a material matter or asset, undue influence or pressure such as stating that a wedding will not go ahead unless the agreement is signed, or, a material change in circumstances such as the birth of children.
How do I go about having an agreement prepared?
A binding financial agreement needs to be prepared by a specialist family lawyer. Our family law specialists support clients through the process of decision making around relationship issues to discover the best result possible for them and their loved ones. We will work with you to explore what you want to achieve from your agreement and can manage the process in a sensitive manner. Our aim is to ensure your relationship is maintained and improved by doing an agreement. We therefore endeavour to work collaboratively with your partner or spouse’s lawyer while also ensuring your interests are protected.
There is more to preparing a financial agreement than just preparing a standard one size fits all contract. We look for the best way to tailor the agreement to meet your particular requirements and circumstances. To ensure the validity of your agreement we need to take detailed instructions from you. There must also be full and frank disclosure as to each party’s assets, liabilities and their values.
Sometimes this process can involve us working with your accountant, financial planner or other lawyers within our firm to ensure the terms of the agreement align with any asset protection structures you may have in place, and with your Will and estate planning.
We will always provide you with written legal advice about the effect of the agreement on your rights, and the advantages and disadvantages of entering into the agreement. It is important that you fully understand the implications of the financial agreement and by having this advice in writing it gives you time to digest it and to make sure the agreement accurately reflects your intentions.
This process can take some time to complete so it is important if you are planning to move in with your partner, or, to get married that you contact us several months before the event so we can prepare the agreement in plenty of time. That way neither party feels under pressure to sign the agreement.