Binding Financial Agreements
A binding financial agreement is an agreement under the Family Law Act which deals with the division of property of a relationship and spousal maintenance after separation when parties have come to an agreement. You can enter into a binding financial agreement before marriage or the commencement of cohabitation, during your relationship or after separation or divorce.
Binding financial agreements entered into before marriage or the commencement of cohabitation are commonly known as prenuptial agreements, or “prenups”. These are most often entered into when one person in the relationship is bringing in more property than the other person and that person wants to “quarantine” that property from any future property division.
There are instances where binding financial agreements can be set aside by the Court, such as instances where it is satisfied that:
- the agreement was obtained by fraud (including non-disclosure of a material matter);
- circumstances have arisen since the making of the agreement rendering it impracticable for the agreement in whole or in part to be carried out; or
- there has been a material change in circumstances (relating to the care, welfare and development of a child of the relationship) and, as a result of that change, the child or the party who has caring responsibility for the child will suffer hardship if the court does not set the agreement aside.
In practice, the majority of binding financial agreements that get challenged (for the reasons above) are prenuptial agreements. The great difficulty with them is that it is an open-ended agreement that may extend for 50 years or more before being called upon, making it almost impossible to envisage what may happen over that period and the position the parties will be in when the agreement is attempted to be brought into effect.
Binding financial agreements entered into between parties upon separation are less likely to be challenged as the agreement reached between the parties regarding the division of their property can take into account their current circumstances as at the date of division.
Whether it is before, during or after your relationship, if you and your partner wish to enter into a binding financial agreement, it is important that you do it legally. The Family Law Act has strict requirements which need to be met in order for the agreement to be binding. Most importantly, both parties must get independent legal advice in order the agreement to be binding. If the agreement is not done legally, you might find that the agreement could again be challenged and set aside by the court, rendering all of your assets subject to a property division by the court. Therefore, it is absolutely vital that if you and your spouse or ex wish to enter into a binding financial agreement, you speak to an expert family lawyer like one of our team to guide you through the process.