The Family Law Act 1975 (Cth) allows married couples to make regulated financial agreements between themselves about the distribution of their matrimonial property in the event of their separation. These agreements include financial agreements made prior to the commencement of a relationship, during a relationship, before marriage and after marriage, and after separation. They are more commonly described as pre-nuptial agreements and post-nuptial agreements. Couples in de facto relationships are afforded the same type of control over their financial affairs under the Family Court Act 1997 (WA).
In summary, a Financial Agreement (also known as a Binding Financial Agreement) involves two people in a relationship waiving their rights to seek uncertain orders from the Family Court in exchange for the certainty of a predetermined agreed outcome, which may be considered as far or may instead benefit one more than the other.
As a result, the law imposes various requirements before a financial agreement will be binding and restrictions upon the content of those agreements.
The primary restriction is a requirement that the financial agreement contain a statement from each party that the party was provided with independent legal advice concerning the effect of the agreement on the party’s rights and the advantages and disadvantages of making the agreement.
If a Financial Agreement does not strictly comply with the legislative criteria, it may potentially be set aside by the Family Court if it is satisfied that the agreement is “void, voidable or unenforceable” or “a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable”.
Until recently, one of the attractions of using a Financial Agreement was that it could be financially advantageous to one party over the other. This is because the Family Court does not have to consider whether the terms of a proposed Financial Agreement is just and equitable between the parties.
However, the Courts have the ability to set aside Financial Agreements for technical reasons (ie. one or both of the parties have not received independent legal advice) and also for ethical reasons. For example, they can be set aside if the terms of the Financial Agreement are unfair and if the parties engaged in unconscionable conduct during the negotiations (ie. one party tells the other party to sign a Financial Agreement or they will cancel their upcoming wedding).
Financial Agreements are a valid option for individuals who wish to protect their wealth in the event of a future separation. They can minimise their chances of having the Financial Agreement set aside by ensuring their partner has ample time to consider the proposed terms with the assistance of suitable legal advice, avoidance of associating the signing of a Financial Agreement to a specific date or event, the inclusion of appropriate financial allowances for children (or anticipated future children), and an assurance that the terms are fair to the party with less wealth.
If you have any questions about Financial Agreements or wish to discuss your personal circumstances and suitable options, please feel welcome to contact one of our family lawyers by emailing us at [email protected] or calling 08 6141 3227.