This guide is intended to be general in nature, and Commins Hendriks Solicitors recommend you seek legal advice tailored to your needs before entering into a binding financial agreement. Commins Hendriks’ team of family law professionals can help you with your questions.
What are they?
It is possible for couples to have a binding financial agreement in place that covers what happens to each party's respective property and financial resources if the parties separate.
Agreements can be made before the relationship, during the relationship or marriage, or after the relationship or marriage has ended.
The agreement can cover property, financial resources of either or both parties, as well as maintenance of either or both parties.
Why have one?
Some couples, particularly those who have had prior relationships or marriages, often choose to enter into a binding financial agreement with their current partner, to ensure everyone’s interests are protected and to provide certainty of outcome in the event the relationship breaks down.
Agreements can also serve to simplify the property settlement process after parties separate.
What is involved?
To make a binding financial agreement, there are some requirements that must be met, and they include:
- It must be in writing;
- It must be signed by both parties;
- Each person must seek independent legal advice regarding the document; and
- Each person must provide evidence that they have sought independent legal advice (i.e. a certificate signed by the lawyer they saw).
What is the effect of a binding financial agreement?
In general, if an agreement satisfies all the requirements, then a court cannot make an order regarding things covered by the agreement that is inconsistent with the agreement.
If the agreement does not satisfy all the requirements, the court is not bound to take notice of the agreement.
Situations when the agreement is not binding can include:
- If the general laws of contract are not adhered to. There are complex legal concepts involved here which your lawyer can explain to you;
- If one party has not made a full disclosure of their financial situation to the other party or if one party has been dishonest or fraudulent in disclosing their financial position;
- If the requirements referred to above have not been properly adhered to; or
- If a material change regarding the care, welfare and development of a child of the relationship has arisen since the Agreement was entered into, which would result in the party seeking to overturn the Agreement suffering hardship should that not occur.
Advantages and Disadvantages:
- Knowledge that your well-drafted binding financial agreement will protect both your interests in the event of a relationship breakdown. This can be reassuring if you have already been through the breakdown of a relationship before.
- Because the law in this area is fairly complex, there is some uncertainly about when these agreements can and will be set aside, and how the courts will interpret the law.
- If all contingencies have not been thought of prior to the agreement, the actual use of the agreement could be unfair to one or both of the parties.
What should I do if I would like a binding financial agreement – prior to the relationship commencing, or during the relationship?
It is important you discuss what you would like your binding financial agreement to cover as a couple. If you wish to enter into a binding financial agreement, the following are some of the things that you will need to discuss with your partner beforehand:
- Do you both intend to work during the relationship?
- Do you plan to have, or do you already have children?
- Do you have children from previous relationships?
- What will happen if either of you is injured and so can no longer work?
- What will happen if a child has a disability or illness that requires significant care?
- What provisions would you like to make for your retirement?
- Do you intend to have joint assets, including bank accounts, or separate ones?
- What is your plan to meet your living expenses?
- Do either of you expect to receive an inheritance? If so, how much and do you wish to make any specific provision in relation to that inheritance and what do you plan on doing with it?
Once you have discussed these things, you should make an appointment with your lawyer. You will be required to provide further information, including details of your current income, assets and liabilities, and preferably valuations of any substantial assets you have. Bank account statements, shareholdings, superannuation interests and other investment documents may also be required.
On provision of all relevant information, your lawyer will provide you with a draft agreement and with legal advice regarding the effect of the agreement on your rights and the advantages/disadvantages to you. Your partner will be required to obtain his or her own independent legal advice regarding the agreement before it is binding.