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A Financial Agreement, also referred to as a Binding Financial Agreement, is a legal agreement or contract under the Family Law Act 1975 (Cth) if you are or were married or Family Court Act 1997 (WA) if you are in a de facto relationship.
A Financial Agreement is essentially a Contract entered into between you and your partner (or former partner) determining how your property and financial resources are to be dealt with if you separate.
The Financial Agreement does not come into effect unless and until there is a separation. You may enter into a Financial Agreement:
- before marriage (or de facto relationship);
- during marriage (or de facto relationship), and before separation;
- during marriage, and after separation; or
- after divorce (or the end of a de facto relationship).
The financial agreement sets out how your finances, assets, liabilities, superannuation and financial resources are split at the conclusion of your relationship.
A Financial Agreement may also incorporate other matters incidental or ancillary to property issues, such as spousal maintenance and child support.
When is a financial agreement binding
A financial agreement will binding on the parties to the agreement if, and only if:
- the agreement is signed by all parties; and
- before signing the agreement, each party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement; and
- either before or after signing the agreement, each spouse party was provided with a signed statement by the legal practitioner stating that the advice referred to in paragraph (b) was provided to that party (whether or not the statement is annexed to the agreement); and
- a copy of the statement referred to in paragraph (c) that was provided to a spouse party is given to the other spouse party or to a legal practitioner for the other spouse party; and
- the agreement has not been terminated and has not been set aside by a court.
NOTE: The requirements for a binding financial agreement are slightly different depending on whether you are or were married or in a de facto relationship.
Advantages of a financial agreement
- you can “contract out” of property and, to some extent, spousal maintenance entitlements under the Family Law Act 1975 (Cth);
- no court appearance is required upon separation;
- versatility — they can be used before or during a marriage, after separation or after divorce;
- the recitals can be used to give the background to the agreement and justify its terms and operation;
- since the Family Law Legislation Amendment (Superannuation) Act 2001 (Cth) commenced on 28 December 2002, a financial agreement can be or incorporate a superannuation agreement;
- may incorporate “matters incidental or ancillary to” property and spousal maintenance;
- may be used after separation to effect an interim distribution of property if the parties do not want to determine property and maintenance matters on a final basis. For example, they may be elderly and want to keep a farm or business together for their children; and
- since 21 November 2008, third parties can be parties to a financial agreement along with spouse parties.
Disadvantages of a financial agreement
Some of the disadvantages of a financial agreement include:
- each party requires very specific and detailed independent legal advice. This can be expensive as they are generally far more costly to negotiate, prepare and advise on;
- there are risks of professional negligence claim against legal practitioner;
- there is no process for registration of financial agreements with a court. This could be problematic if both parties lose their copies of the agreement and their solicitors’ copies cannot be located or have been destroyed;
- if the agreement is made before marriage or before separation, one party is usually advantaged over the other. There is a risk of litigation many years later and a risk of a profound negligence claim many years later;
- transactions may not be exempt from stamp duty;
- even if the statutory requirements are not met, the agreement can still be found to be binding upon the parties in some circumstances;
- parties may incur significant costs in relation to a proposed financial agreement which may never be executed.
How can we help?
The friendly and professional family lawyers at HFM Legal can advise you on all the various aspects of a financial agreement and negotiate, prepare, review and provide independent advice to you on Financial Agreements.
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