What were then called Binding Financial Agreements in Family Law matters but are now more commonly known as Financial Agreements (FAs) were introduced in December 2000. They were designed to relieve pressure on the Family Courts, as an alternative to property Orders being made by consent. The aim was also to save the parties to a marriage or a de facto relationship the time and expense of going to Court to have their property agreement approved.

There are three main types of FAs that parties to a marriage or a de facto relationship can enter into–

  1.  Pre-Nuptial Agreements – These are used where a couple, before getting married or starting a de facto relationship, agree on what assets (and liabilities, like a mortgage, personal loan or a credit card debt) they are bringing into the relationship, and what will happen to those, and any later acquired, if they separate. These are popular with couples who are entering into second (or later) relationships, as one party may be bringing in considerably more assets than the other, and the wealthier partner wants to protect those assets. Usually, the Pre-Nup will set out how much each party will get, depending on how long they are together, and whether or not they have children together.
  2. FAs during a marriage or a de facto relationship – FAs can be entered into while a marriage or a de facto relationship is continuing, to say what will happen to assets and liabilities if the relationship breaks down. As with all FAs, including Pre-Nups, they can only relate to property, including superannuation, but not children. “Property” includes real estate, motor vehicles, shares, and money in the bank – even Bit Coin.
  3. FAs made after a marriage or de facto relationship has broken down – These are the most common agreements that Family Lawyers deal with. They are made when a couple have agreed, often after mediation and with the help of their lawyers, on dividing up their assets and liabilities. As with all FAs, the parties must each see an independent lawyer who carefully explains the terms of the agreement with their client and advises whether they should sign it. The lawyers sign statements that they have given that advice, the parties each receive a copy of the signed agreement and it comes into force.

The advantages of an FA 

The main benefit of an FA is that it allows the parties to reach their own agreement regarding property distribution if their relationship fails. The FA is not scrutinised by the Court. This can be important, especially with agreements that are made at the end of a relationship. The alternative, of preparing Consent Orders to be made by the Court, is that a Registrar is required to read them. If the Registrar considers that the Consent Orders are outside the range of what the Court would have ordered if the matter had gone to trial, they will ask the parties to explain why, for example, one party is getting a greater share of the assets than the other. If the Registrar is still not satisfied, they may reject the proposed Consent Orders. Unlike FAs, neither party has to have a lawyer when preparing and filing Consent Orders, although it’s a good idea for at least one of them to be legally represented, as the Orders have to be properly and carefully drafted.  

The disadvantages of an FA

Apart from possible problems with Pre-Nups, where undue pressure may have been put on one party to sign the Agreement, (“Sign, or the wedding is off” – that one was set aside by the High Court),  the other area of concern can be where one party is to receive a disproportionate share of the assets and an FA is to be used to finalise a property settlement. In such cases, the judge may, if one party seeks to have the FA set aside, try to find a technical defect or other way to end the Agreement. That would mean the parties renegotiating their settlement, or the case going on to a trial at Court – a traumatic, and expensive, exercise. However, these cases are exceptions and FAs are generally a good way to regulate financial matters between married or de facto couples. But remember that children’s issues can’t be dealt with in an FA.

So, is it worth considering a Financial Agreement in your situation? The answer is that your Family Lawyer is the best person to talk that through with, and the Family Law Team at Tonkin Legal Group are here to help you. Contact us today on (03) 9435 9044.