Binding Financial Agreements
A financial agreement (also referred to as a binding financial agreement, pre-nuptial agreement and/or cohabitation agreement) can be made:
- before a couple marries or commences a de facto relationship
- during a marriage or while a couple is in a de facto relationship
- after a marriage or de facto relationship ends
Financial agreements set out how property will be divided between a couple if/after their relationship ends. The agreement sets out the division of assets without the intervention of the Court.
How is a Financial Agreement made?
Once an agreement is reached between the parties on how their property will be divided if or after they separate, their negotiations will need to be documented in a formal agreement that meets specific requirements. The parties will meet with their respective family lawyers who will explain their rights and obligations under the proposed agreement before finalising it.
For the financial agreement to be valid:
- each party must obtain independent legal advice
- both parties must sign the agreement
- each party’s lawyer must sign a certificate confirming that legal advice was provided to their client prior to them signing the agreement
- the agreement must not have been set aside by a Court or terminated
How does a Financial Agreement work?
A financial agreement operates like a contract between the parties whereby they agree to exclude the jurisdiction of the Court regarding their property matters after separation.
Each person has certain rights and responsibilities and must fulfil the promises made under the terms of the agreement. This may involve the closing of bank accounts, the payment of money by one party to another within a particular time, or the sale of a home and distribution of funds according to the agreement. The parties must act reasonably and in good faith to fulfil the terms of the agreement.
Financial agreements are not approved or registered by the Court. If a person experiences difficulties in enforcing the agreement, they will need to apply to the Court for a determination that the agreement is valid and enforceable and not void due to specific circumstances, for example, fraud or duress, in which case the Court could set the agreement aside.
Financial Agreements made before Separation
A financial agreement made before a couple marry, or while they are in a de facto relationship can help provide certainty to each party about what will happen to their financial affairs if they subsequently separate. These agreements are often referred to as pre-nuptial agreements (or prenups).
Entering into such an agreement can help protect assets existing prior to the relationship (which is important if you have children from a previous relationship), protect a business from closure if a relationship breaks down, or outline what is to happen with an inheritance.
Whether you are entering into a new relationship or are already in one, if you and your partner have concerns about your respective assets, it might be a good idea to enter into a financial agreement.
Financial Agreements made after Separation
As noted, financial agreements can be used to formalise a property division after a couple have separated. In some circumstances they can be set aside by a Court. Alternatively, you may apply for the approval of consent orders through the Federal Circuit and Family Court of Australia, which may be considered a more formal way to finalise a property settlement. Consent orders are made by filing an application with the proposed orders with the Court. In most cases, the parties will not need to attend Court and if the orders are granted, they are legally enforceable.
We can explain the pros and cons of the different processes so you can decide what is best for your circumstances.
If you need assistance, contact [email protected] or call 03 9741 3777 to arrange a consultation with an experienced family lawyer in Werribee.