Prenuptial and Binding Financial Agreements
Our family law solicitors are often contacted by couples who are about to be married for advice on the preparation of a “Prenuptial Agreement”. Usually, one or both spouses are seeking to protect assets accumulated prior to the marriage from claims made by the other spouse if the relationship breaks up. Many people have the impression that such agreements can only be entered into at or about the time of the marriage and refer to this agreement as a “Prenup” or “Prenuptial Agreement”. The correct term used in family law is “Binding Financial Agreement”. Such agreements may be prepared not only prior to the marriage but also during the marriage or after separation. It also similarly applies to de facto relationships.
Who and when can a Binding Financial Agreement be entered into
The law allows married couples, de facto couples, soon to be married couples and parties about to enter into a de facto relationship to enter into a binding legal agreement about their financial arrangements should their marriage or de facto relationship break down. Hence, such agreements can be entered into by parties:-
- contemplating marriage or entering into a de facto relationship;
- during a married or de facto relationship; or
- upon separation of a marriage or de facto relationship.
It is also available to same sex couples.
Purpose and Coverage of a Binding Financial Agreement
A Binding Financial Agreement can be simple or complex, and can cover all of the parties’ financial affairs or only part of them. The purpose of a Binding Financial Agreement is to:-
- preserve and protect assets from Property Division claims made by the other spouse in the Family Court should the relationship break down and also to avoid claims by the other spouse for Spousal Maintenance after separation; and
- bring certainty in financial matters should the relationship break up as the parties would know what assets and financial support each would be entitled to upon separation.
When you enter into a Binding Financial Agreement you agree to contract out of the laws contained in the family law legislation which provides for the criteria and manner of property division on the breakup of a relationship. Hence, it may not be advantageous for one of the spouses to enter into the Binding Financial Agreement as that spouse may be entitled to a larger portion of the assets upon separation under family law legislation.
Financial agreements can therefore cover:
- how a couple’s assets and money are to be divided upon a breakup of the relationship;
- whether one party is to provide financial support known as spousal maintenance to the other party during the marriage and/or upon separation;
- any other issue relating to the relationship.
Each party must make full and frank disclosure of their assets, liabilities and financial resources in the Binding Financial Agreement, failing which there is a substantial risk that the agreement may be set aside by the Family Court.
Parties are also required by law to obtain legal advice from a family law solicitor before entering into Binding Financial Agreement. The agreement will only be binding if, before signing the agreement, both parties have obtained the requisite independent legal advice from a family law solicitor and have certification from their respective family law solicitors confirming they have received independent legal advice.
Setting Aside of a Binding Financial Agreement
When signed, a Binding Financial Agreement remains legally binding on the parties until:-
- The same parties enter into a subsequent Binding Financial Agreement expressly providing for the terminating of the earlier agreement;
- It is set aside by the Family Court.
A party to the Binding Financial Agreement can apply to the Family Court to set aside the agreement, Some of the grounds for setting aside are as follows:-
- Fraud, including material non-disclosure at the time when the Binding Financial Agreement was entered into by the parties. For example, one party fails to disclose the existence of a significant asset.
- If a party entered into the agreement for the purpose of defrauding or defeating a creditor;
- If circumstances arise after the agreement which make it impossible or impracticable for the entire agreement or part of it to be carried out;
- If a material change in circumstances occurs after the making of the agreement relating to the care, welfare and development of a child of the relationship and, as a result, a party to the agreement will suffer hardship. For example, parties have children after the Binding Financial Agreement was entered into by the parties.
- If a party’s conduct in the making of the agreement was unconscionable. For example, undue pressure was imposed on one party to enter into the Binding Financial Agreement.
A Binding Financial Agreement is a private arrangement between the parties. The Family Court therefore retains jurisdiction to make a finding that the agreement entered into by the parties does not comply with the law and is not valid. A Binding Financial Agreement is therefore not an arrangement cast in stone that will protect assets from claims made by the other spouse. There is always a possibility that if challenged, the Binding Financial Agreement may be set aside by the Family Court.
Preparation of a Binding Financial Agreement
Robertson Hayles Lawyers can assist you with the preparation of a Binding Financial Agreement and can also provide you with independent legal advice about the terms and effect of any financial agreement which you wish to enter into.
As part of this service, our family law solicitors will also provide you with advice in regards to how the Family Court may divide your assets if there is no Binding Financial Agreement in place so that you are aware whether you would be disadvantaged in entering into such a financial agreement. Our family law solicitors are also able to advise you on whether you have grounds to set aside a Binding Financial Agreement if you are later dissatisfied with the terms contained in the agreement.