Financial Agreements

What is a Financial Agreement ?

A legally binding financial agreement is a written agreement, which complies with Part VIIIA and or part VIIIAB of the Family Law Act 1975 (Cth) (the Act).

You can make a financial agreement either before marriage, whilst married, after separation or a marriage breakdown, or after divorce. Any de facto couple, be they hetero or same-sex, can also make a financial agreement which entitles them to the same protection married couples enjoy under the Act.

Whilst the main effect of the agreement is to prevent either party making an application to the Family Court for the division of property, negotiating a financial agreement encourages a couple to agree on how to divide their property in the event of, or following, separation.

This can be reassuring if you have already been through divorce or a separation before and it’s much easier to talk about such things while you are still planning to live happily ever after.

Binding Financial Agreements follow the lifecycle of a relationship and can be entered into at the following stages:

(i) before cohabitation (de facto agreement) (section 90UB);

(ii) during a continuing de facto relationship (section 90UC);

(iii) after a de facto relationship has broken down (Section 90UD);

(iv) before marriage (Pre nuptial) (section 90B);

(v) during marriage planning to stay married (post nuptial) (section 90C);

(vi) during marriage in contemplation of separation (section 90C);and

(vii) after a divorce order is made (section 90D).

Whilst there are no figures on the breakdown of de facto relationships (hetero or same-sex), there is no reason to think that figures in those communities differ from those for married couples. Overall, there is a failure rate of around 48% for all relationships, and second relationships have higher failure rates than first ones!

Many people starting new relationships, with assets or children from an earlier one, like the security of a financial agreement. For de facto couples, a financial agreement is the equivalent of a pre or post nuptial agreement. Since the Family Law Act 1975 (Cth) was amended and took effect on 1 March 2009, financial agreements have been available to same-sex and opposite-sex couples.

The popularity of using a binding financial agreement shows men and women are taking more financial and legal precautions against a relationship breakdown. Most couples see it as a form of insurance or as a legally binding safety net which they hope to never need. Among other things, the financial agreement can deal with children, maintenance, or the property of the parties. It is also possible to deal with only one of these issues.

Here are some examples of the different types of financial agreements and the reasons for having them:

A pre-nuptial agreement (section 90B)

Leon is the son of a well-to-do farmer. The family farm has not changed hands in over 100 years and the management and ownership has just passed to Leon. Leon met Andrea 6 months ago and they have decided to get married. Even though both parties are devoted to one another, Leon is worried that should the marriage fail, Andrea could make a claim for this valuable family asset. The couple have agreed in principle that Leon’s family farm should be kept out of any future dispute and shall remain in his ownership and control.
Leon can protect the farm by determining how his assets should be dealt with by entering into a financial agreement made under section 90B of the Family Law Act 1975 (Cth). This type of agreement is commonly known as a pre nuptial agreement.
Entering into a financial agreement now will remove any doubt or uncertainty later, which could lead to arguments. A financial agreement, through mutual understanding and appreciation, can actually strengthen a relationship.

A post nuptial agreement (section 90C)

Tracy is a bright young business woman who has worked hard to build her own business and buy her own home. Love, being what it is, has swept her off her feet and after a short romance upon a cruise ship she has married Clive. Clive is a handsome young truck driver with a sharp wit and a 1972 Land-Rover. Even though the newlyweds are very much in love, and they intend living happily ever after, Tracy is concerned she may have rushed into the relationship without considering any of the financial ramifications of such a quick decision. Both Tracy and Clive have agreed that should they not live happily ever after forever, then Clive will not make any claim for the house and business assets which Tracy has worked so hard to acquire. Similarly, Tracey wants nothing to do with the Land-Rover.

This arrangement can become legally binding if Tracy and Clive make a financial agreement under section 90C of the Family Law Act 1975 (Cth). This will effectively isolate the pre marital assets of the couple from their post marital assets, paving the way for a happy future together without any unnecessary suspicion. This type of agreement is sometimes known as a post nuptial agreement.

A continuing de facto relationship agreement (section 90UC)
Ted, age 70, is a retired real estate developer. He owns several parcels of commercial real estate as well as his own home, which is furnished with valuable antiques and artwork. Ted has three grown children.
Ted’s live in companion, Anthony, is 48 and has worked for the past 15 years as a community social worker. He owns his own home and has a modest superannuation fund with the Department of Health and Aging.

Anthony is a bachelor and has no children of his own. Ted wants to make sure that Anthony will be comfortably provided for if he dies first but he also wants to make sure that his property will revert to his children after Anthony dies.

Ted can do some estate planning and make a will or trust that lets Anthony use (but not actually own) Ted’s property during his lifetime with the assets going outright to Ted’s children when Anthony dies.

Even with a good estate plan in place, under recent amendments to the Family Law Act, Anthony could still be entitled to a share of Ted’s estate even if they are not in a sexual relationship.

If Ted and Anthony agree, Anthony can waive his rights in a financial agreement under section 90UC of the Act. Anthony can declare he will not make a claim on Ted’s estate. This guarantees that Ted’s estate plan will work the way he has intended.

Will a financial agreement prevent any future court action?

A financial agreement will lessen the chance of needing to go to court but you can never eliminate access to the Family Court, regardless of how your agreement is worded. If one party hides an important fact, the other party can always go back to court. It is up to the court to decide whether to intervene and overturn the agreement.

One might think that a financial agreement needs to be fair to both parties but this is not necessarily the case. Should your agreement come before a court, the court will not dismiss or set an agreement aside simply because it favours one party over the other. This is because section 90G of the Family Law Act requires both parties to receive independent legal advice before they sign the agreement. This process ensures that both parties understand the advantages and disadvantages, financially or otherwise, of signing the agreement. It prevents either party going to court with the excuse that they didn't know what they were signing at the time.

Sitting down with your partner to work out what your agreement needs to achieve, before you both run off to see the lawyers, will save you considerable time, money and anxiety. Furthermore you'll minimise the risk of having a lawyer draft a one sided agreement that fails to reflect what either of you want.

Our expertly drafted Financial Agreement Kit provides all the information you need to draft a professional agreement before your first meeting with a solicitor. This will not only save your solicitor’s time, it will also help to considerably reduce your legal costs.

Whatever the stage of your relationship, RP Emery and Associates can provide a template financial agreement with easy to follow instructions that will save you time and money!

Your Financial Agreement Kit includes a comprehensive manual that explains the law as it applies to this agreement. It will show you in simple terms how to thoroughly cover important legal requirements, and how to complete your agreement in detail. In addition, it contains alternative legal clauses you can use to personalise your agreement.

 

Financial agreements for de facto couples

Pre Nuptial Financial Agreement

Post Nuptial Financial Agreement

Separation Financial Agreements

Divorced Financial Agreement

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