What is a Financial Agreement ?
A Financial Agreement is a written agreement, which complies with Part VIIIA and or part VIIIAB of the Family Law Act 1975 (“the act”).
You can make a Financial Agreement either before marriage, while married or after separation or divorce. In fact any defacto couple be they hetero or same-sex can make a Financial Agreement and have all the same protection married couples enjoy under the Act.
Whilst the main effect of the agreement is to prevent either party making an application to the Family Court for the division of property. The aim of introducing financial agreements is to encourage all couples to agree about how to divide their property in the event of, or following, separation.
This can be reassuring if you have already been through divorce or a separtaion before and it’s much easier to talk about such things while you are still planning to live happily ever after.
Financial Agreements follow the lifecycle of a relationship and can be entered into at various stages:
(i) before cohabitation (de facto agreement pursuant to section 90UB);
(ii) during a continuing de facto relationship (de facto Pursuant to section 90UC);
(iii) after a de facto relationship has broken down (90UD);
(iv) before marriage (Pre Nuptial pursuant to section 90B);
(v) during marriage planning to stay married (Post Nuptial Pursuant to section 90C);
(vi) during marriage in contemplation of separation (separation pursuant to section 90C);and
(vii) after a divorce order is made (section 90d).
While there are no figures on breakdowns of de facto relationships (hetero or same-sex), there is no reason to think that figures in those communities will differ from those for married couples. Overall, there's a failure rate of around 48% for all relationships, and second relationships have higher failure rates than first ones.
Many people starting new relationships, with assets or children from an earlier one, like the security of a financial agreement. For de facto couples it's the equivalent of a pre or post nuptial agreement and since the amended the Family Law Act took effect on 1 March 2009 they have been available to same-sex and opposite-sex couples.
The popularity of financial agreements shows men and women are taking more financial and legal precautions against a relationship breakdown. Most see it as a form of insurance -- a legally binding safety net which they hope to never need.
Your financial agreement can deal with children, maintenance, property of the parties, among other things or you may choose to deal with only one of these issues.
Remember Financial Agreements are intended to be used at any time during the life cycle of a relationship.
Leon is the son of a moderately wealthy farmer. In fact the family farm has not changed hands in over 100 years and the management and ownership has just passed to Leon. He and Andria met 6 months ago and they have decided to get married. Even though both parties are devoted to one another, Leon is worried that should the marriage fail Andria could make a claim for this valuable family asset. The couple have agreed in principle that Leon ’s family farm should be kept out of any future dispute and shall remain in his ownership and control.
Leon can protect the Farm by pre determining how his assets should be dealt with by entering into A financial agreement made under section 90B of the Family Law Act. This type of agreement is commonly known as a ‘pre nuptual’ agreement.
Entering into a financial agreement now will also remove any doubt or uncertainty which often leads to arguments and in doing so can actually strengthen the relationship.
Tracy is a bright young business woman who has worked hard to build her own business and buy her own home. Love ,being as it is, has swept her off her feet and after a short romance upon a cruise ship she has married Clive, a handsome young truck driver with a sharp wit and a 1972 Land-Rover. Now even though the newlyweds are very much in love and they intend living happily ever after, Tracy is concerned she may have rushed into the relationship without considering any of the financial ramifications of such a quick decision. Both she and Clive have agreed that should they not live happily ever after then Clive will not make any claim for the house and business assets which Tracy has worked so hard to aquire. Tracey wants nothing to do with the Land-Rover.
To finalise this arrangement Tracy and Clive should make a financial agreement under section 90C of the Family Law Act. This will effectively isolate all of Tracy’s and Clive’s pre marital assets from their post marital assets, paving the way for a happy future together without suspicion. This type of agreement is sometimes known as a post nuptual agreement.
Ted, age 70, is a retired real estate developer. He owns several parcels of commercial real estate as well as his own home, which is furnished with valuable antiques and artwork. Ted has three grown children.
Anthony, Ted’s live in companion is 48 and has worked for the past 15 years as a community social worker. He owns his own home and has a modest superannuation fund with the Dept Health. Anthony is a bachelor and has no children of his own. Ted wants to make sure that Anthony will be comfortably provided for if he dies first, but he also wants to make sure that his property will revert to his children after Anthony dies.
Ted can do some estate planning and make a will or trust that lets Anthony use (but not actually own) Ted’s property during his lifetime, with the assets going outright to Ted’s children when Anthony dies. Even with a good estate plan in place, under amendments to the Family Law act, Anthony could still be entitled to a share of Ted’s estate, even if they are not in a sexual relationship.
If Ted and Anthony agree, Anthony can waive his rights, in a financial agreement under s90UC of the Act, and declare he will not make a claim on Teds estate. This guarantees that Ted’s estate plan will work the way that Ted intends.
Is a financial agreement going to prevent any future court action?
The Agreement will lessen the chance of needing to go to court but you can never eliminate access to the Court, regardless of how your agreement is worded. If one party hides an important fact the other party can always go back to court and it is up to the court to decide whether to intervene and overturn the agreement.
One might think that a financial agreement needs to be fair to both parties; however this is not necessarily the case. Should your agreement come before a court, the courts will not dismiss or set an agreement aside simply because it favours one party over the other. This is because section 90G of the Family Law Act requires both parties receive independent legal advice before they sign the agreement. This process ensures that both parties understand the advantages and disadvantages, financially or otherwise, of signing the agreement and it prevents either party going to court with the excuse that they didn't know what they were signing at the time.
Sitting down with your partner to work out what your agreement needs to achieve, before you both run off to the lawyers, will save you considerable time, money and anxiety. Furthermore you'll minimise the risk of having a Lawyer draft a one sided agreement that fails to reflect what either of you wants.
Our Financial Agreement kit provides all the information you need to draft a professional agreement before your first meeting. This will not only save your solicitors time, it will also help to considerably reduce your legal costs .
What ever the stage of your relationship, RP Emery and Associates can provide a Financial Agreement template with easy to follow instructions that will save you time and money.
Your financial agreement kit includes a comprehensive manual that explains the law as it applies to this agreement. It will show you in simple terms how to thoroughly cover important legal requirements, and how to complete your agreement in detail. In addition, it contains alternative legal clauses and provisions you can use to personalise your agreement.