Pre- Nuptial Agreements
Whether you are entering into a new relationship or are already in one, if you and your partner have concerns about dividing your respective assets on separation, it might be a good idea to enter into a binding financial agreement.
These agreements are commonly referred to as pre-nuptial agreements or “pre-nups” and can help provide certainty to both parties about what will happen to their financial affairs in the event of separation. This agreement can protect assets existing prior to the relationship (particularly important if you have children from a previous relationship), protect a business from closure if a relationship breaks down, or outline what is to happen with an inheritance.
How does a binding financial agreement work?
The Family Law Act provides that partners who are planning to get married or enter into a de facto relationship, or who are already married or living in a domestic relationship, can enter into a financial agreement. These agreements can deal with the division of property and superannuation, as well as spousal maintenance. A binding financial agreement operates as a contract between the parties in which they agree to exclude the jurisdiction of the Federal Circuit and Family Court of Australia regarding their property matters in the event of a future separation.
For the financial agreement to be valid:
- each party must obtain independent legal advice
- both parties must sign the agreement
- each party’s lawyer must sign a certificate attached to the agreement confirming that independent legal advice was provided to their client prior to them signing the agreement
Financial agreements made after separation
A financial agreement, setting out how a couple has decided to divide their assets and liabilities, may also be made after they separate. Unlike consent orders, financial agreements are not lodged with the court and therefore, not subject to the court’s approval. They can be a quicker and less expensive way to finalise a property settlement, however, in some cases, it may be preferrable to use court orders which some lawyers consider a more formal approach. We can explain the difference between consent orders and financial agreements and help you decide what is best for your circumstances.
How is a binding financial agreement enforced?
A binding financial agreement operates like a legal contract between the parties through which each person has certain rights and must perform their obligations. This may involve the closing of bank accounts, the payment of money by one party to another within a particular time, or the sale of a home and distribution of funds according to the agreement. The parties must act reasonably and in good faith to fulfil the terms of the contract.
Because binding financial agreements are not approved or registered in court, a person seeking to enforce a financial agreement to which they are a party must apply for a determination that the agreement is valid and enforceable. If the court finds that the agreement is affective then an order will be made for its enforcement.
An application for enforcement of a financial agreement may be opposed by an application to have the agreement set aside. There are some limited reasons that a binding financial agreement might be set aside by a court, including that the agreement was obtained by fraud or duress or was made to defeat the interests of the other party or a person with whom one of the parties had pending property matters.
If you need any assistance, contact one of our lawyers at [email protected] or call 1300 704 064 for a no-obligation discussion and expert legal advice.