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:
- Enter into a binding financial agreement; or
- 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:
- It must be in writing;
- It must be signed by all parties to the agreement; and
- 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.
Whether it’s on an American TV sitcom, or in a Kanye West song, we’ve all heard the term “Pre-nup”. But what does this mean? And how do they work in Australia? Can they be used outside of contemplating a walk down the aisle?
On this side of the globe, we have Financial Agreements. This is a contract between two or more parties that can be entered into before, during or after a relationship.
We will focus on these “pre-nup” or “pre-nuptial” Financial Agreements. These are highly technical agreements made by parties before marriage under Section 90B of the Family Law Act 1975. The agreement can cover how any or all property and financial resources of the parties will be dealt with in the event of a separation. It can also cover what spousal maintenance, if any, will be paid between the parties. Other ancillary matters can also be included.
Importantly, Financial Agreements are being used more and more to protect assets that one person brings into a relationship, or the assets that one person will receive during their relationship at some point in time from family or some other source. This allows assets to be preserved for children of a previous marriage, as an example, children that are yet to be born or even extended family members.
The possibilities are near endless. There can be an entire quarantine of property or financial resources, or one party can acquire an incremental interest over time in the other person’s property, to adjust for the passage of time or even the pitter patter of tiny feet. Financial Agreements can be reviewed at an agreed time in the future, and they can even have an end date if this is what the parties agree on and want.
These agreements are not just for people contemplating marriage. There are different circumstances where couples can enter into this type of agreement, including:
- The couple is going to live together but there is no plan to get married
- The couple is going to live together and they do plan to marry, but have not decided when they will get married
- The couple is already living together
- The couple is already married
The Family Law Act 1975 outlines specific requirements that must be met to ensure that the agreement is binding and enforceable.
One of the requirements under the Act for a financial agreement to be binding is that both parties must be given independent legal advice before the agreement is signed. This is about the effect of the agreement on the party’s rights, and the advantages and disadvantages to that party of making the agreement. The lawyers need to sign certificates to this effect.
Both parties must engage their own lawyers. A common lawyer cannot be engaged by both parties for the purposes of a Financial Agreement, even if both parties are completely in agreement about the terms and what is to happen.
The law surrounding Financial Agreements is in an almost constant state of change in Australia. The legal fraternity is currently awaiting the outcome of a High Court case involving the issue of duress when parties sign these types of agreements. It is vitally important to ensure that the lawyer you engage has a high level of knowledge around the technical and practical aspects of this area of family law.
These are sensitive issues, with people’s relationships continuing to hopefully grow and flourish while we negotiate and draw these agreements up. Often there are many people involved and invested in the process on the outer edges, such as business partners, adult children and extended family members. As a result, these matters need to be handled with care by the lawyers concerned to promote harmony where possible, and avoid unnecessary conflict which could harm the relationship.
We work with a range of lawyers who we recommend to our clients’ partner or fiancés, who share our pragmatic approach and are highly competent in this area.
Talk to us today if you are considering an agreement for your relationship, no matter what stage it is at. We can discuss with you the many varied options for how such an agreement can work for you and achieve the level of asset protection you desire.
First published 15 September 2017
