Family & Relationship Law eBulletin - 30 June 2014
Financial agreements (or, as they are colloquially known, “Binding Financial Agreements”) have been available to Australian married couples for many years. In 2009, the option was extended to cover those in de facto relationships, including same sex relationships. This means that all Australian couples can plan and document arrangements in relation to their financial affairs and division of assets should they separate.
- What is a financial agreement?
- What can be in a financial agreement?
- What is the effect of a financial agreement?
- Who should consider entering into a financial agreement?
A financial agreement records a couple's intentions in relation to how some, or all, of their property and financial assets will be divided in the event that they separate. These assets can include real estate, bank accounts, shares and investments and superannuation.
Couples can enter a financial agreement at any time prior to or during a relationship, or even post separation. The agreement must be in writing and signed by both of the parties. In addition, the agreement must also contain statements by two independent lawyers confirming the advice they have given their client prior to them signing the agreement.
In addition to financial and property assets and superannuation, a financial agreement can also cover obligations by one party to pay spousal maintenance to the other (if the couple separates) or to exempt each other from any maintenance obligations altogether.
Where a financial agreement is created prior to entering or during a marriage or de facto relationship, the agreement can also address how the couple’s finances and living arrangements will be met during their relationship.
A financial agreement cannot, however, include “lifestyle” clauses such as non-adultery clauses that punish one party financially in the event of misbehaviour.
A financial agreement can cover some or all of a couple’s property. For example, a couple may wish to create an agreement that outlines how to distribute the property which they have each brought into a relationship, including real estate, investments, business interests, superannuation and other asserts. The agreement can also deal with assets each of the parties expects to receive in the future, such as an inheritance, or even a beneficial entitlement in a trust or family business.
Essentially, a couple can tailor their financial agreement to suit their particular circumstances, financial positions and their ultimate financial aims.
Once a valid financial agreement has been executed, it will remove a Court’s ability to determine property settlement and maintenance matters for that couple (except in very limited circumstances). This gives a couple the certainty of knowing how their financial affairs will be determined if they separate.
What are the benefits of a financial agreement?
- Parties can reach their own agreement and have the certainty of knowing that their financial relationship can be subsequently finalised on their agreed terms;
- Financial agreements can be entered into prior, during or after a marriage or de facto relationship (including a same sex relationship).
- A financial agreement is the most effective way to prevent or terminate any on-going maintenance obligation to an ex-partner.
- The cost of entering into a financial agreement is generally cheaper than preparing the necessary documents to have property settlement orders approved in the Family Court.
- They can protect agreed assets to safeguard them not only for the individual partner, but also for children from previous relationships.
- People who have children from previous relationships and want to protect their wealth for the children’s
- People who are expecting a large inheritance or gift which they wish to protect in the event of relationship breakdown.
- People who may be exposed to an on-going maintenance obligation in the event that they separate from their partner, because the other party would not be in a position to support themselves for reasons such as lack of employment skills, on-going care of children, ill-health etc.
- Where there is a large disparity in the assets and financial resources of the parties at the commencement of the relationship.
- Where each party wishes to maintain separate financial arrangements during their relationship and if the relationship should end.
- Parties who desire to regulate in advance the financial consequences of a breakdown of their marriage or relationship to ensure that they have certainty.
Binding financial agreements are not suitable for everyone. Before entering into one, careful consideration needs to be given as to the appropriateness of the agreement to your personal circumstances.
Lander & Rogers has many years’ experience in this complex area of law, and is able to offer discreet and practical advice to suit your particular needs and financial aims.
All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.