What is a Binding Financial Agreement?
Binding Financial Agreements (also known as financial agreements, pre-nups and post-nups) are agreements made between either married or de facto couples and may cover a range of different circumstances, such as:
- Pre or postnuptial
You can make a binding financial agreement if you are planning to cohabit, marry, separate, or divorce.
The agreement contains various terms relating to the division of property and financial resources and the provision of maintenance in the event of, or after a relationship ends. A binding financial agreement is legally binding. If validly prepared a financial agreement can be a less formal and cost-effective solution to dividing property.
How is a financial agreement made?
Parties should negotiate a financial agreement in good faith and give proper disclosure of their assets and financial resources. Once an agreement has been reached, one of the parties’ legal representatives will prepare a document in the required form for the other party’s consideration.
Each party must meet separately with a lawyer who will provide independent legal advice regarding their respective rights and obligations under the agreement. When signing the agreement, the parties also sign an acknowledgement confirming that they are aware of these rights and obligations.
How is a financial agreement enforced?
A financial agreement operates like a legal contact – each party has certain rights and must perform his / her obligations under the contract. This can involve the closing of bank accounts, the payment of money by one party to another within a particular time, or the sale of a home and distribution of funds according to the agreement.
Financial agreements are not approved or registered in court. However, if the process for forming and signing the agreement and the agreement itself complies with the formalities outlined above, the agreement is generally binding and will be enforced should a party need to resort to court proceedings.
Setting aside a Financial Agreement
An application made to enforce a financial agreement may be opposed by an application to have that agreement set aside. This may occur if:
- the agreement was obtained by fraud or duress;
- a party failed to disclose significant assets when making the agreement;
- the agreement was made to defeat the interests of the other party or a person with whom one of the parties had pending property matters;
- there is a dramatic change in circumstances creating hardship for a party to the agreement or concerning the welfare of a child of the relationship;
- the court considers it is ‘just and equitable’ to preserve the rights of a party.
Alternatives to financial agreements – consent orders
In some cases, it may be preferable for separating couples to have an agreement for the division of property endorsed (approved) by the court through consent orders.
The application for consent orders must include full financial disclosure by both parties and the court will only approve the order if, on the information provided, it is just and equitable to do so.
Unlike a binding financial agreement, consent orders can only be used after a relationship breaks down. Consent orders, unlike financial agreements, may also include matters concerning parenting arrangements.
Our experienced lawyers can provide advice on the most suitable way to finalise your property affairs and prepare the necessary documents for you. We aim to make this process as simple and cost-effective as possible while ensuring your rights are protected and that you receive a fair and reasonable distribution.
If you feel you have been pressured into signing a financial agreement, our lawyers can advise on the process and likely outcome of having the agreement set aside.