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Financial Agreements

Financial agreements may be used to record a parties’ property and financial settlement after their relationship breaks down. More typically, however, they can be made before or during a relationship to determine how their assets and financial resources should be dealt with if the couple separate in the future.

These agreements are commonly referred to as ‘pre-nuptial’ agreements and can be used to protect a party’s assets. For example, an agreement may provide that an asset owned by a party at the beginning of a relationship remains their own if the couple separate. An agreement can also set out how assets accumulated during the relationship should be distributed in the event of separation.

Benefits of a financial agreement

Financial agreements can be effective provided they are carefully and accurately drafted. The pre-nuptial style agreement can be entered into before or during marriage and can also be utilised by de facto and same sex couples.

Typically, financial agreements provide a quicker and less expensive way to divide property if a relationship breaks down. Financial agreements can help:

  • protect assets already owned by one party before a relationship
  • protect likely inheritances
  • acknowledge where there is a much greater financial contribution by one party
  • ensure that children of previous relationships inherit
  • preserve family farms or other businesses for future generations
  • provide certainty between parties at the beginning of a new relationship

How is a financial agreement made?

It is important to meet certain legal requirements when creating a prenuptial financial agreement. The agreement must comply with the provisions and formalities prescribed under the Family Law Act 1975. This includes that each party to the agreement must receive independent legal advice. The parties should be advised of:

  • the effect of a binding financial agreement on their rights
  • the advantages and disadvantages of creating a binding financial agreement

Binding financial agreements that are properly constructed as stipulated by the Family Law Act have the potential to negate a Court’s orders regarding property and spousal maintenance rights.

What is covered in a financial agreement?

A financial agreement sets out how the parties’ financial resources, liabilities and assets will be dealt with if and when they separate. They may also contain provisions regarding financial support (maintenance) by one partner for the other.

The agreement operates like a legal contract – each person has certain rights and must perform his/her obligations under the contract. This may involve the closing of bank accounts, the payment of money by one party to another within a particular time, the sale of a home and distribution of funds according to the agreement, etc. The parties must act reasonably and in good faith to fulfil the terms of the contract.

Setting aside a binding financial agreement

An application for enforcement of a financial agreement may be opposed by an application to have the agreement set aside. An agreement may be set aside in circumstances such as that:

  • the agreement was obtained by fraud or duress
  • a party failed to disclose significant assets when making the agreement
  • the agreement was made to defeat the interests of the other party or a person with whom one of the parties had pending property matters
  • there is a dramatic change in circumstances creating hardship for a party to the agreement or concerning the welfare of a child of the relationship
  • generally, the court considers it is ‘just and equitable’ to preserve the rights of a party

If you believe you signed a financial agreement under these conditions, you may need our assistance with having the agreement set aside. Our lawyers are experienced with complex financial and family law matters and can help you receive the appropriate support to reach a satisfactory outcome.

 

The Family Law Act acknowledges that people should be free to make their own arrangements regarding the division of property after a relationship breaks down, without intervention from the Court. However, there are many issues to consider when creating a financial agreement, so it is important to be advised by an experienced family lawyer to ensure the agreement is compliant and tailored to your specific needs.

If you need assistance, contact us at [email protected] or call 02 6622 5566 for expert legal advice.