binding financial agreements

Do I need a binding financial agreement?

When separation occurs, it can be difficult to know what you need and who to speak to. Let us explain what a binding financial agreement is and when it might be appropriate.

What is a binding financial agreement?

A binding financial agreement is a document that records an agreement as to the division of a married or de facto couple’s respective property interests. A binding financial agreement can address how the property and financial resources of a couple are dealt with, as well as spousal maintenance.

A binding financial agreement can be completed either before a relationship has commenced, during a relationship or after a relationship has broken down. For the purposes of this blog, we will focus on binding financial agreements completed after a relationship has ended.

What are my options for recording a property settlement?

When a couple separates, and they agree about the division of their property interests, there are usually two options available to them to enter into a property settlement and finalise their financial relationship with one another. For a binding and enforceable property settlement agreement, they can either:

  1. Enter into a binding financial agreement; or
  2. Apply for consent orders and file the proposed orders with the court for the court’s consideration and approval.

There are advantages and disadvantages to each of the above options, so you should seek legal advice as to the option which will be most suitable for your circumstances.

Should I choose a binding financial agreement?

A binding financial agreement may be more suitable in circumstances where, for example, the parties wish for their agreement to be recorded and kept strictly private and confidential between the parties and their solicitors. Another example is where the agreement may not be seen in the eyes of the court as being a just and equitable distribution of the net assets.  A private agreement such as this done correctly will effectively oust the jurisdiction of the court to make property adjustment orders.

Binding financial agreements are completed without any supervision by the court system. Therefore, you have more control over when the agreement comes into effect and are not subject to the court’s final approval of the terms of settlement.

Binding financial agreements will not be suitable for all cases though. Also, they can often be more expensive than obtaining consent orders, because your lawyer will be required to take your instructions, draft detailed documents with precision to ensure it is binding and provide comprehensive written legal advice to you regarding your rights and other matters in relation to the document.

What are the requirements of a binding financial agreement?

There are strict requirements set out in the Family Law Act 1975 (Cth) (FLA) which must be adhered to for a financial agreement to be binding. Some of the requirements include, but are not limited to:

  1. It must be in writing;
  2. It must be signed by all parties to the agreement; and
  3. Both parties must have received independent legal advice including on the effect of the agreement on their rights before the binding financial agreement is signed.

Binding financial agreements can be set aside by the court where the requirements have not been met, or where other circumstances are present such as fraud, non-disclosure etc. Whether a financial agreement is binding on the parties would ultimately be a decision for the court to make if it were ever challenged, so it is important to engage the right lawyer who can draft the agreement correctly and provide you with sound legal advice.

Cutting corners

You will almost certainly be able to find a “cheap and quick” binding financial agreement after a search on Google. But beware, the risks of entering into a binding financial agreement that does not satisfy legislative requirements can be significant.

It could end up costing you much more in the long run to cut corners on recording a settlement.  This could be to either rectify a deficient agreement, or respond to a court application seeking property adjustment orders.  This is even after you thought you had finished and settled.

Seek expert advice to ensure you are protected.

Speaking to a professional

If you have separated from your partner (or are considering it) and would like advice on your options regarding property settlement, contact Daykin Family Law today to book an initial consultation with our Director, an Accredited Family Law Specialist, at a reduced fixed fee.

Daykin Family Law has extensive experience drafting and advising on binding financial agreements and can assist with finalising your property settlement sooner so you can move forward with certainty. We can meet with you in our offices conveniently located in Fortitude Valley close to the CBD, or by phone or Skype.

Divorce and Separation

Separation and divorce in Australia: what’s the difference?

There is a misconception that a divorce will also resolve your property settlement with your ex-partner: It will not. Obtaining a divorce order will not give you finality in your financial relationship with each other.

Divorce in Australia

For divorce in Australia, parties must complete a divorce application and file it with the court.  The court will consider this material at a hearing, the date of which is set down when you file the application (usually 3 or so months after filing).  If a divorce order is granted, this will provide you with a legal separation, however it will not automatically alter your property interests under family law.

To be eligible to apply for a divorce, you must have been separated from your spouse for at least 12 months.  There can be circumstances where parties may have separated but they remain living together under the same roof for a period time or have had short periods of reconciliation and then separated again on a final basis.  You may still be eligible to make a divorce application in these situations.  You should speak to a lawyer to discuss your particular circumstances and confirm your eligibility and the court’s requirements.

Options for finalising a property settlement

Separate to a divorce, a property settlement will provide you with an alteration of property interests (for example, determining who will keep the house, or whether it needs to be sold; who will be responsible for the credit card liabilities; how superannuation will be split between you etc).  The process for finalising a property settlement will depend on whether the parties have agreed or can come to an agreement regarding how their property interests should be divided.

If both parties agree

If a separated couple agrees to alter their property interests and the terms of that property settlement, they can have a legally binding and enforceable agreement by:

  1. Entering into a binding financial agreement; or
  2. Applying to the court for consent orders.

Using either option, or in some cases both options, your lawyer will need to take your detailed instructions in relation to the property that you own (including assets, liabilities, superannuation and financial resources), the contributions made by both parties throughout the relationship and any factors which may impact on the parties moving forward (such as age, health, income disparity, care of children etc). They will assess your entitlement and confirm whether your agreement is in line with what the courts would consider is just and equitable. They will then draft the required documents for you to affect the property settlement. There will be different processes from this point depending on which option you choose: binding financial agreement or consent orders.

If both parties cannot agree

Mediation is a process whereby the parties attend upon a mediator, with or without their solicitors present, to attempt to come to an agreement about the division of their property interests. The mediator should assist the parties to keep the conversation to relevant information and work with you to generate options for terms of settlement which are acceptable for both of you.  If an agreement is reached at mediation, you can approach a lawyer to draft the relevant documents and finalise the property settlement.

Court proceedings are started as a last resort if the parties cannot agree on how to divide their property interests. Proceedings are not usually commenced without attempts to resolve the matter by way of negotiation or alternative dispute resolution as they can be costly and emotionally taxing on all parties involved.

A formalised property settlement will usually be required

It is important to finalise your financial relationship with your ex-partner.  An informal agreement, even if it is in writing, may not be binding and one of the parties may be able to make an application to the court seeking an arrangement that is different to the agreement made between you (provided they apply within the relevant time limit).  Therefore, having your agreement formalised through a binding financial agreement or consent orders is necessary to protect yourself moving forward.  A lawyer can assist you with this and guide you through this process.

Time limitation for property settlement – married couples

There is a 12-month time limitation for a married couple to apply to the court for a property settlement or for spousal maintenance after a divorce order takes effect.  Whilst the court can grant leave to apply outside of this time limit, it can be a difficult and costly process and success is not guaranteed.

In some cases, we recommend that parties enter into substantial negotiations before divorcing which often results in a resolved property settlement before an application for divorce is even made or a divorce order is granted.

What if we weren’t married?

Former de facto couples are substantially afforded the same rights under family law legislation to a property settlement as married couples.  The time limitation is different however for de facto couples, whereby they have 2 years from the date of separation to make an application to the court for property settlement or maintenance.  Like married couples, the court can grant leave to apply outside of this time limit but, again, this can be a difficult process and success is not guaranteed.

Talk to an expert

Contact Daykin Family Law to discuss your options with our Accredited Family Law Specialist & Director, Shannon Daykin.  Let us help you navigate separation, divorce and the property settlement process in a cost effective and efficient manner.