A lot of couples, both pre-marriage and post-marriage, are entering into Financial Agreements to deal with the distribution of their property and assets in the event of a separation. Similarly, separating couples are using Financial Agreements as a way to distribute property and assets post-separation too.
So what is a financial agreement? What makes it binding? When do they come into effect? And are they worth the paper they are written on?
In this blog, we provide some basic information on Financial Agreements and how to ensure that they are binding on both parties.
What is a Financial Agreement?
A Financial Agreement is essentially a contract between two parties in a relationship (both before or after being in a de facto relationship or married) or between two parties who have separated and are looking to divide their assets and property post-separation.
The elements of a Financial Agreement, as with any standard contract, are an offer, an acceptance, and a consideration. In addition, a Financial Agreement must also contain equitable remedies that can be accessed in the event of a breach of the Agreement.
Parties that enter into a Financial Agreement can be in a de-facto relationship, a same-sex couple, they can be married, or they can be separated.
By entering into a Financial Agreement, both parties are agreeing to preclude the Family Court ‘s jurisdiction from making a decision in relation to the division of their property and assets if they separate or have separated (for those parties who are no longer together).
What makes a financial agreement binding?
Both parties require independent legal advice from a different lawyer before they can sign the Financial Agreement and it becomes binding.
In addition, both parties must receive advice on the advantages and disadvantages of entering into the Financial Agreement from their independent lawyers. There must also be full and frank disclosure between the parties in relation to their property and assets at the time the Financial Agreement is being entered into.
Further, the independent legal advice must be from lawyers who are registered as practitioners of the High Court of Australia. Both parties must sign the Financial Agreement and then one party retains the original and the other must be provided with a certified copy of the signed Financial Agreement. The final step is for the signed statement of legal advice to be exchanged between the two parties and their lawyers.
When do binding financial agreements come into effect?
Financial Agreements can come into effect at different times depending on the circumstances of the parties including upon signing or when a couple separate.
It’s important to note that if one party to the Financial Agreement passes away, this is not considered a separation. Therefore the financial agreement could still be binding on the surviving party’s legal representative. It is important to have a Will which also reflects the terms of the Financial Agreement.
Another important note is that if a couple have entered into a Financial Agreement as a de-facto couple, if they then subsequently marry, the Financial Agreement becomes invalid. This is different to a Financial Agreement that is entered into as a ‘pre-nuptial’ arrangement (also known as a pre-nup), as in this insistence the Financial Agreement is made on the basis that the couple are intending to enter into marriage, so their nuptials would not invalidate the Agreement.
So are Financial Agreements worth the paper they’re written on?
The short answer is yes, but only if the Financial Agreement complies with the strict drafting and executing conditions as set out above. If these have not been complied with, then you may find that the Financial Agreement is not legally binding and therefore the Family Court’s jurisdiction to make a division of property could be enforced.
So if you are thinking of entering into a Financial Agreement it is extremely important you consult with a family law specialist who can ensure that the Financial Agreement is legally binding and worth the paper it is written on.
If you already have a Financial Agreement in place, it is always a good idea to review your Agreement when circumstances change. This might be after the birth of a child, or if one party receives an inheritance. It may mean that your Financial Agreement will need to be amended to reflect these new circumstances.
When you need a lawyer, it’s important to get it right. At Legally Yours we connect you with high quality, fixed price lawyers. This means you’ll know upfront exactly what you’ll be paying. No more hourly billing, no more price uncertainty.
For a complimentary consultation and fixed-fee quote from Stacey Taylor, a Legally Yours approved family law specialist, connect with us at http://www.legallyyours.com.au/get-a-quote/ or call us on 1300 822 708.
Written by Mira Stammers and Karen Finch from Legally Yours, in conjunction with Stacey Taylor.