Binding financial agreements are recommended in 2 situations:
1. Where a couple (in an existing relationship or intending to enter into a defacto relationship or marriage) wish to agree about how they will divide their property if they separate. (These agreements are often colloquially called a “prenuptial agreement” or “cohabitation agreement”.)
2. Where a couple have separated and they have agreed on their financial arrangements and they wish to formalize this agreement in a binding way.
If a couple does not have a Financial Agreement and they separate, their property will be divided in accordance with the principles established in the Family Law Act and subsequent cases, and this usually means that all of the property of the parties at that time is included. Having an agreement will mean that the Family Law Act will not apply; the provisions of the agreement will. Therefore having such an agreement can save a significant sum of money including the costs associated with property settlement negotiations or litigation. It can be compared to income protection insurance or life insurance.
A Financial Agreement precludes the Family Court from determining a dispute between the couple about a division of their property. Such agreements set out how the parties’ property, liabilities and financial resources will be divided if they separate in the future, or now if the parties have already separated.
“Prenuptial” or “cohabitation” Financial Agreements are often used where one party has significant property and wishes to keep some of it separate from the other party for example for future estate planning for children.
Financial Agreements also provide parties with the opportunity to ‘contract out’ of the Family Law Act in relation to spousal maintenance. That means that, provided the legislation has been strictly complied with, parties can eliminate the risk that their former partner will attempt to claim spousal maintenance from them in the future. However it is important to recognise that this option is not available to everyone. For example, if at the time a Financial Agreement comes into effect, a party to the Financial Agreement is unable to support him, or her, self without a means-tested government benefit the option to ‘contract out’ of spousal maintenance is not available.
For these agreements to give a couple the protection they seek when they enter them they must be done properly and strictly in accordance with the legislation. Each party to the Financial Agreement must have obtained independent legal advice and must contain a certificate from the legal practitioner confirming that the practitioner has advised their client, independently of the other as to effect of the agreement on the rights of that party; and the advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement.
People with complex business structures need to take particular care that they consider potential problems under any commercial contract with third parties. They should also seek advice as to the revenue implications including stamp duty and tax. Other structures or documents may need to be reviewed as an overall financial planning or succession strategy.
Murdochs do not produce these agreements for a fixed fee. To ensure that the agreement addresses the couple’s actual circumstances, is clear and unambiguous and likely to stand up to scrutiny and be upheld by a court if later disputed we charge our normal hourly rate for the actual time spent for the important legal work involved.
WHERE TO NOW?
If you would like to speak with an expert to discuss your family law issue, please call us on (07) 1300 068 736 or email us.