Financial Agreement is the term the Federal Circuit and Family Court of Australia (FCFCOA) uses for Pre-nuptial agreements (pre-nups), Post-nuptial agreements (post-nups); and cohabitation agreements. The Family Law Act 1975 (Cth) allows separated parties to a marriage or de facto relationship to enter into a financial agreement to avoid disputes about division of their property. A financial agreement alters the normal avenue for division of property, deviating from the FCFCOA’s normal jurisdiction.

How do they work?

A financial agreement can specify how parties to a marriage or relationship agree to divide their asset pool if their relationship breaks down. A financial agreement can allow the parties to amicably separate without having to resort to costly, time-consuming and stressful litigation in the FCFCOA.

Properly drafting and executing a financial agreement promotes certainty and can prevent the FCFCOA from interfering with a mutually agreed property distribution.

When can parties enter into a financial agreement?

A financial agreement can be entered into:

• before the commencement of a marriage or relationship; or
• at any point during the marriage or relationship; or
• after separation or divorce.

Is a financial agreement binding on the FCFCOA?

A financial agreement is binding if each party obtains independent legal advice and has their solicitor sign a certificate of independent legal advice: if these requirements are not met, the agreement may be set aside or void.

Parties should review a financial agreement entered into before the commencement of or during a marriage or relationship about every two years or after a significant event in their lives (such as childbirth or receipt of an inheritance).

What can a financial agreement cover?

A financial agreement deals with property, financial resources and maintenance, which can include:

1. The financial settlement (i.e. property settlement, including superannuation entitlements);
2. The financial support (maintenance) of one spouse by the other;
3. The agreed arrangements for the children; and
4. Any incidental issues.

What your lawyer needs to know to advise you about a BFA

When your lawyer is advising you about a financial agreement, before they can draft an agreement, they may need you to instruct them about the following:

1. Both parties’ current assets including vehicles, shares, furniture, and valuables;
2. The current value of these assets;
3. Their superannuation entitlements;
4. The current market value of property;
5. Each party’s liabilities including any loans, mortgages or debts;
6. Whether any other family law financial agreement may apply;
7. The date cohabitation commenced;
8. The separation date;
9. Each parties’ occupation and future income earning capacity;
10. Whether either party has been married previously; and
11. The number and age of any children.

What are the benefits of a financial agreement?

If a relationship ends, a properly drafted and executed financial agreement may give the parties a degree of certainty, making them feel more secure in knowing that the property they have accumulated before the relationship or marriage is safe. If parties agree in advance about the division of property after a separation, any issues arising are more likely to be resolved with less stress, argument and legal expenses, and no court delays.

Can a financial agreement be set aside?

The Family Law Act sets out when the FCFCOA may set aside a financial agreement, including:

1. where the agreement has been obtained by fraudulent means, including material non-disclosure (e.g. by failing to disclose an asset);
2. a party to the agreement entered into the financial agreement for the purpose of defrauding or defeating a creditor;
3. the agreement is void or unenforceable (e.g. the financial agreement was not prepared properly and does not comply with the legislative requirements in sec 90G or sec 90UJ);
4. circumstances have arisen since the financial agreement was made which make it impossible or impracticable for it to be carried out;
5. since the making of the financial agreement, as a consequence of a material change in circumstances (relating to the care, welfare and development of a child of the relationship), a party will suffer hardship if the Court does not set the financial agreement aside;
6. a party’s conduct in the making of the financial agreement was unconscionable;
7. there is a “payment flag” on a superannuation interest dealt with by the financial agreement the termination of which by a “flag lifting” is unlikely; or
8. the financial agreement deals with an “unsplittable” superannuation interest.

Can a Financial Agreement be terminated?

A financial agreement can be terminated by:

1. the parties entering into another financial agreement, provided the new agreement specifically states that the former agreement is terminated; or
2. the parties entering into a “termination agreement” pursuant to sec 90J (for married couples) or sec 90UL (for de facto couples). As with the original financial agreement, a termination agreement is only binding and enforceable if it is signed by all parties and each party has received independent legal advice.

Here to Help

Contact us for advice and assistance in negotiating and drafting a binding and enforceable financial agreement.