If you are making a Financial Agreement, you have a duty to make full and frank financial disclosure to the other party.
This is generally achieved by completing the Schedules attached to the Financial Agreement, in which both parties specify their assets and liabilities, as at the date the Agreement is made.
Why do I need to make financial disclosure?
The Family Law Act (and the Family Court Act in Western Australia) go to lengths to ensure that both parties enter into the Agreement with fully informed consent.
Because of the binding nature of Financial Agreements, and because both parties are giving up substantial legal rights (namely, the right to make an application to the family court for property division orders it considers “just and equitable”), entering into such an Agreement is not a trivial matter.
In an attempt to ensure that both parties are fully informed before committing to the Agreement, the Act requires each party to:-
- make full and frank disclosure. All cards should be placed on the table. The value and true extent of all assets should be declared. In fact, the Act goes so far as to give the Court rights to set aside a Financial Agreement, if a party to the Agreement has not make full disclosure of a material matter; and
- obtain independent legal advice, which is evidenced by a Certificate of Independent Legal Advice.
The lawyer must ensure the client is aware of:-
- the rights that he or she is giving away by signing the Agreement (generally, a party will release his or her right to apply to the Court for a property division). This right is given up in lieu of the spouse parties reaching their own mutual private agreement, thus avoiding interference, time, cost and uncertainty associated with Court proceedings; and
- the advantages and disadvantages to him or her of signing the Agreement.
Making full financial disclosure then, has the purpose of not only informing the other party of the full extent and value of the assets and liabilities that make up the matrimonial asset pool, but enabling the lawyer to properly assess and advise upon whether the Agreement is advantageous or otherwise to their client and advise them accordingly in conformity with the Family Law Act / Family Court Act.
What if I don’t make full financial disclosure?
If you don’t make financial disclosure of all material matters, you run the risk of having the agreement challenged, and set aside at a later date. A party to the Agreement can challenge the Agreement on the basis that full disclosure of a material matter was not made. This falls under the umbrella of fraud in section 90K of the Family Law Act (s 90UM for de facto couples).
For example, suppose you did not declare money you have squirrelled away in a savings account, an interest in property (including an equitable interest) or an interest in a trust, as at the date the Agreement was made.
This information may have affected your partner’s agreement to the asset split. Your partner may not have signed the Agreement had he or she known of the additional assets. This gives your partner has a legal basis to challenge the Agreement, and have it set aside.
What is the cut-off date for full disclosure? Should full disclosure be made as at the date of separation.
No. There is no cut-off date.
You must declare all assets and liabilities as they stand as at the date of making the Agreement. This could be years after the separation date.
My account/shares/property fluctuates daily – how do I make accurate disclosure
Minor fluctuations are unavoidable and not enough to have an agreement set aside – the non-disclosure must relate to a material matter.
Try to be as accurate as you can, and obtain valuations if need be. There are clauses in the Financial Agreement (link to our FA’s) which address this issue.
What do I need to declare?
The Family Law Rules (13.04) give us some idea of what needs to be declared in order to comply with the duty to give full and frank disclosure of financial circumstances (this list is not exhaustive):-
- the party’s earnings, including income that is paid or assigned to another party, person or legal entity;
- any vested or contingent interest in property;
- any vested or contingent interest in property owned by a legal entity that is fully or partially owned or controlled by a party;
- any income earned by a legal entity fully or partially owned or controlled by a party, including income that is paid or assigned to any other party, person or legal entity;
- the party’s other financial resources;
- any trust –
- of which the party is the appointor or trustee;
- of which the party, the party’s child, spouse or de facto spouse is an eligible beneficiary as to capital or income;
- of which a corporation is an eligible beneficiary as to capital or income if the party, or the party’s child, spouse or de facto spouse is a shareholder or director of the corporation;
- over which the party has any direct or indirect power or control;
- of which the party has the direct or indirect power to remove or appoint a trustee;
- of which the party has the power (whether subject to the concurrence of another person or not) to amend the terms;
- of which the party has the power to disapprove a proposed amendment of the terms or the appointment or removal of a trustee; or
- over which a corporation has a power mentioned in any of subparagraphs (iv) to (vii), if the party, the party’s child, spouse or de facto spouse is a director or shareholder of the corporation;
- any disposal of property (whether by sale, transfer, assignment or gift) made by the party, a legal entity mentioned in paragraph (c), a corporation or a trust mentioned in paragraph (f), that may affect, defeat or deplete a claim –
- in the 12 months immediately before the separation of the parties; or
- since the final separation of the parties;
- liabilities and contingent liabilities.
(Paragraph (1)(g) does not apply to a disposal of property made with the consent or knowledge of the other party or in the ordinary course of business.)
Legal entity means a corporation (other than a public company), trust, partnership, joint venture business or other commercial activity.
I’ve made full disclosure – do the assets need to be split 50/50 now?
There is no 50/50 rule when it comes to splitting assets.
As a guide, the Court will consider these issues when making an asset split, and you should too:-
- the financial contribution made directly or indirectly by the parties to the assets or the improvement of the assets;
- the non-financial contributions made directly or indirectly by the parties;
- contribution by the parties to the welfare of the family and the children, including those made in the capacity of homemaker or parent. For example, if one partner has stayed home to care for children whilst enabling the other partner to continue to progress his or her career and accumulate savings, assets and superannuation. The Court will place emphasis on the non-earning partners role and adjust the assets accordingly;
- the income, property and financial resources of each party and the capacity of each of them for gainful employment;
- the earning capacity of either party;
- the ability for each party to maintain an appropriate standard of living;
- child support obligations of either party;
- the age and state of health of the parties.
Need more information?
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