Why do I need a Pre-nup?
Amendments to the Family Law Act in 2000, paved the way for parties to enter into Binding Financial Agreements, as opposed to having to have their settlements approved by a Court.
The changes to the Family Law Act allow for agreements between married couples and domestic partners in the following ways:
- Before the relationship commences (this is loosely referred to as a pre-nuptial agreement -which is an American term that has become popular in Australia).
- During the relationship/marriage, and
- After separation and/or divorce.
So why do people have Pre-nup’s ?
1. If the parties have an agreement before the relationship commences, or around the time the relationship commences it will usually:
a. Set out what will happen with the parties’ joint and individual assets if they separate.
b. Make it clear that assets owned by each party will be retained by that party if the relationship breaks down. I.e. houses owned before the parties began living together, or superannuation built up before then.
c. Make arrangements for ongoing financial support of one of the parties, if necessary.
d. Mean the parties can avoid having to proceed to Court if they separate, because the agreement says how the assets are to be split.
Agreements made during the relationship
2. Agreements made during a relationship, can provide the same arrangements pursuant to (a), (b), (c), and (d) above. The difference with these agreements is that they can be made this at any stage of the relationship i.e. the day after the marriage, or start of the relationship or 10 years after.
Agreements made after the breakdown of a relationship
3. Agreements made after the breakdown of a relationship deal with how the parties will distribute the assets. This is usually negotiated between the parties and their legal representatives and does not require the involvement of the Court.
Are financial agreements binding?
There have been some recent high-profile cases involving Financial Agreements. Often these relate to parties who have significant assets and the financial capacity to argue whether the agreement is binding or not in Court.
If the agreement:
- Accurately lists the party’s assets, and there is agreement as to the value of those assets
- Agreement has been negotiated in good faith without either party placing undue pressure on the other party to sign the agreement
- If the agreement is fair to both parties
- Appropriately follows the relevant sections of the Family Law Act regarding the provision of independent legal advice (the agreement is only binding if each party signs the agreement with their solicitor, and their solicitor provides them with independent legal advice).
Then most Financial Agreements will be binding and have the same effect as a Court Order. In other words, the parties will be bound by the terms of the agreement they made.
If a party fails to abide by the term of the agreement, then it can be enforced by the Court. This would require a party to commence legal action in the Family Court, requesting the Court makes the offending party abide by the agreement.
Can I end the Agreement at any time?
It is possible to set aside (end) a financial agreement.
However, these days it is becoming more difficult to do so. In the early life of Financial Agreements small technical errors were enough to have the agreement set aside. Nowadays such errors can simply be amended by the Court and the agreement will stand.
It is difficult and expensive to attempt to have an agreement set aside.
First, you would need to commence proceedings in the Family Court. This means filing an Application asking that the court set aside the Financial Agreement.
Secondly, you must raise with the court a reason for setting aside the agreement. The fact that you believe the agreement is unfair is not enough.
You need to have specific reasons for the Court to end the agreement, for example :
a. The other party lied to you about their financial situation
b. The other party placed undue pressure on you to sign the agreement
c. The other party deliberately hid assets from you
d. there has been a significant change in circumstances relating to a child of the relationship
e. the appropriate independent legal advice was not provided to you and/or the other party.
f. Given your mental health issues and/or language difficulties, you were unable to understand the terms or the effect of the Agreement.
Even if one of the above reasons applies, it is not always guaranteed that the agreement will be set aside. It is an expensive and risky course of action to take, unless there is a clear reason for the agreement to be set aside.
How does a financial agreements impact on my family law rights?
If you enter into an agreement, and it is held to be binding, then you have no further recourse. The agreement replaces your right to apply for a property settlement in the Family Court.