BINDING FINANCIAL AGREEMENTS UNDER THE FAMILY LAW ACT
If you think that pre-nuptial agreements are the stuff of Hollywood, think again. In Australia, married and de facto couples (including same sex) can formally agree how their property and financial resources will be distributed at the end of their relationship, without the involvement of the courts. These are known as Binding Financial Agreements and can be entered into in anticipation of a marriage or de facto relationship, during a marriage or de facto relationship, or at the end of a marriage or de facto relationship. Binding Financial Agreements that comply with the requirements of the Family Law Act oust the jurisdiction of the court to make a determination regarding the parties’ property and financial matters upon separation and divorce.
What are the Advantages of a Binding Financial Agreement?
If the parties are contemplating entering into de facto relationship or marriage, a binding financial agreement can be of value where one party has significantly greater assets than the other and wishes to protect them.
If your relationship has broken down, but you require a formal agreement for the purposes of effecting property and financial transactions, a Binding Financial Agreement can be entered into without the need to apply to the court for consent orders.
A Binding Financial Agreement can be a cost-effective method of agreeing a financial settlement with your spouse or de facto partner and it can deal with such matters as superannuation entitlements and spousal maintenance.
What are the Disadvantages of a Binding Financial Agreement?
For a financial agreement to be legally binding:
• it must be signed by the parties; and
• the parties must have been provided with independent legal advice from a legal practitioner prior to entering into the agreement about:
o the effect of the agreement on their rights, and
o the advantages and disadvantages of making the agreement at the time the agreement is made; and
• the parties must obtain a signed statement from their legal practitioner stating that the they were provided with independent legal advice.
Should the agreement fail to meet the requirements of the Family Law Act 1975, there is a risk that the agreement will not be legally binding. It is therefore important that Binding Financial Agreements are carefully drafted by a legal practitioner and that full legal advice is obtained by the parties.