Financial agreements are at the heart of many family law matters but remain one of the most poorly understood areas of law. In this series of articles we will outline what financial agreements are, when they are used in family law matters and their key characteristics.
This is vital information for anyone going through the process of implementing a financial agreement and also for accountants, financial planners and other professionals who may be working with someone involved in this process.
In part 1 of this series we discuss the background to financial agreements and when they might be used at the start of a relationship.
Background
The Family Law Act 1975 provides for parties to a marriage or de facto relationship to enter into a binding legal agreement about financial matters should their marriage or de facto relationship break down.
These agreements are what is often referred as a “pre-nup” in the media and more commonly referred to as a “binding financial agreement” by those in the Australian legal profession. Part of the confusion brought about by referencing these agreements as a “pre-nuptial” is that in Australia they can be made before, during or after a marriage or de facto relationship.
In Australia these agreements are most often used at the end of a relationship, rather than before or during.
When is a financial agreement important at the start of a relationship?
If you are party to a relatively new relationship it can be a difficult issue to discuss preparing a financial agreement. But in certain circumstances it is something that both parties may be open to considering. In particular, you might consider a financial agreement if:
- You both bring significant assets to the relationship but you want to avoid having those assets forming part of a joint pool in the event of a break up.
- You are part of a family trust that requires a financial agreement prior to accessing funds or borrowing or investment opportunities from that trust.
- You are involved in a family enterprise that would mean exposing other family members to the sale or division up of assets if elements of the enterprise are not excluded from your relationship asset pool. This is commonly an issue for large family owned rural enterprises.
- You have children from a previous relationship that you want to reassure about how assets will be dealt with in the future.
- You have a current or prospective gift or inheritance you want to protect from future claims.
If you have any questions about financial agreements for yourself or in relation to a client you are advising, please contact a member of our family law team for more information.
In Part 2 of this article we will discuss what matters a financial agreement can cover and how it can assist parties to expeditiously finalise their property settlement without the need for intervention or determination by the Courts.