Financial Agreements

A Financial Agreement is a private contract between you and your either soon to be, current or former partner or spouse. They are also called “Pre-nups” or “Post-nups”.

Financial Agreements removes the power of the Federal Circuit and Family Court of Australia (the Court) in relation to all financial matters to which the Agreement applies (it can relate to the division of assets, superannuation, financial resources as well as setting out or removing the right to any spousal maintenance entitlements).

This means that if the Agreement is binding, the Court does not have the power to make any orders for a property settlement or the payment of spousal maintenance for either of you or soon to be or current partner (if you ultimately separate in the future) or following separation.

Given that Financial Agreements effectively take away a parties’ right to seek relief from the Court, there are very strict legal requirements under the Family Law Act 1975 (Cth) (the Act) that must be met when entering into one.

What types of Financial Agreements can I enter into?

You can enter into a Financial Agreement in in the following circumstances:

1. Before marriage or before the start of a de facto relationship
2. During marriage or during a de facto relationship
3. After separation
4. After divorce

When is a Financial Agreement useful?

Financial Agreements serve a specific purpose. They can:

1. Provide you and your soon to be or current partner with certainty about the financial arrangements if you separate in the future. They can save on the legal costs and stress associated with negotiating or even litigating financial matters.
2. Give you and your soon to be or current partner more control over the outcome on separation because if found to be binding, a Financial Agreement removes the Court’s power to decide on a property settlement or payment of spousal maintenance.
3. Help you and your soon to be or current partner carry out the financial settlement that you want to that would otherwise not be approved by the Court.
4. You can protect assets that you have accumulated prior to the relationship. This is especially the case in second marriages.

What are the technical requirements of entering into a Financial Agreement? When is a Financial Agreement binding?

The Act specifies that in order for a Financial Agreement to be binding:

1. It must be signed by both parties;
2. Before signing the Agreement, both parties were each provided with independent legal advice from an Australian legal practitioner about the effect of the agreement on the rights and about the advantages and disadvantages, at the time that the advice was provided, of making the Agreement;
3. Either before or after the Agreement is signed, both parties were provided with a signed Statement by the legal practitioner stating that the advice (set out in paragraph 2 above) was provided to each party (whether or not the Statement is annexed to the Agreement);
4. A copy of the signed Statement must be given to each party or their lawyer; and
5. The Agreement have not been terminated and is not otherwise set aside by the Court.

In relation to spousal maintenance, the Agreement must provide:

1. The person for whose maintenance provision is made; and
2. The amount provided for that person maintenance.

Even if the above procedural requirements are not strictly satisfied, the Court has the power to find that the Agreement is binding if it is satisfied that it is unjust and inequitable if the Agreement was not binding.

When does a Financial Agreement start to operate?

A Financial Agreement will not take effect until a Separation Declaration is signed by you or your former partner. The Declaration is usually included in the Agreement itself and has strict requirements.

In relation to spousal maintenance, the Court may still have the power to make an order for spousal maintenance if the Court is satisfied that, when the Agreement came into effect the circumstances of a party were such that taking into account the terms and effect of the Agreement, that person was unable to support themselves without an income tested pension allowance or benefit.

When does a Financial Agreement end?

A Financial Agreement can end only in the following ways:

1. If you and your partner enter into another Financial Agreement that state that the previous agreement is terminated;
2. If you and your partner enter into a Termination Agreement (which also has strict requirements); or
3. The Financial Agreement is set aside by the Court.

It is important to remember that once the Agreement is entered into it will be considered binding and the setting aside of any legal agreement, whether a Financial Agreement under the Act or otherwise, is a difficult and expensive process.  The question as to whether the Agreement is valid, enforceable or effective is determined by a Court pursuant to the principles of law and equity.

How we can help

Our Family and Relationship Law team at Coulter Legal have extensive knowledge and experience to help you navigate the Financial Agreement process and whether it is the best way to formalise your property settlement or spousal maintenance entitlements.