Financial Agreements

Binding Financial Agreements first saw the light of day on 27 December 2000 when they became part of the Family Law Act 1975.  These agreements, provided they have been validly executed essentially oust the normal jurisdiction of the Family Court in relation to all property and financial matters. Although these agreements may be varied this is not often done.  The ability to set them aside is very restrictive and may significantly disadvantage one of the parties to the agreement. 

A binding financial agreement may be made before, during or after marriage (but within 12 months of obtaining a divorce).  The courts can make orders to enforce a binding financial agreement.  There are a number of formal requirements which have to be met and if these are not then it is unenforceable.  Essentially these agreements deal with the combined matrimonial pool of assets including all property or financial resources which either or both parties have brought to or accumulated during the marriage which will be dealt with including maintenance following a marital breakdown. 

When the court makes orders adjusting property interest it has to be satisfied that what is being proposed is just and equitable.  For spousal maintenance the court makes orders which it considers proper in the circumstances.  Importantly there are no such requirements when entering into a Binding Financial Agreement apart from the formal requirements which, if not satisfied entitles the court to set aside the agreement. 

A financial agreement is only binding on the parties if:

• The agreement is signed by both parties;
• The agreement contains, in relation to each party to the agreement a statement to the effect that the party to whom the statement relates has been provided, before the agreement was signed by him/her, a certified annexure to the agreement, with independent legal advice from a legal practitioner as to the following matters:
  • the effect of the agreement on the rights of that party;
  • the advantages and disadvantages, at the time the advice was provided, to the party making the agreement.
• The annexure to the agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided;
• The agreement has not been terminated and has not been set aside by a court;
• After the agreement is signed, the original agreement is given to one of the parties and a copy is given to the other.

The certification required by the Act is onerous and many lawyers decline to provide it.  Significant expertise is required by the lawyer to satisfy his/her duty under the Act and neither this nor the time expended comes cheaply.  All advice given to clients executing binding financial agreements should be in writing.  Clients need to make full disclosure of all of their assets and resources.  Not only should the agreement be properly explained to them but it should be fair and reasonable.  If it is not clients should be advised of this together with the grounds on which the court can set it aside.  It is best that Binding Financial Agreements not be used to finalise affairs of separated couples particularly where there are children as there are certain exposures.

There is a common misconception amongst the public that Binding Financial Agreements are straightforward, do not require much expertise and are cheap to obtain, which is far from reality. It is essential that clients disclose any and all assets which they own to each other before executing the agreement otherwise the court can set it aside.  Each party to the agreement needs to retain their own legal representative to avoid any conflict of interest as the consequences for either party can be very different.  Agreements are normally set aside for inadequate disclosure or duress.  A Binding Financial Agreement continues to operate despite the death of a party and operates in favour of and binds their personal representative. It can only be terminated by the parties by entering into a termination agreement and observing the proper formalities.

The major benefits of these agreements are certainty, to protect assets including financial resources and avoid costly litigation following a relationship breakdown.

Other Family Law service areas:

• Separation
• Counselling and Disputes Resolution
• Divorce/Dissolution of Marriage
• Care of Children (Custody, Access, Residence, Contact and Maintenance)
• Child Support and Spousal Maintenance
• Parenting Orders
• Property Settlements
• Domestic Violence
• De Facto Relationships (including same sex relationships)

Contact LAC Family Lawyers now to make an appointment at an office near you.