A written financial agreement which complies with the Family Law Act 1975 allows people in a marital or de facto relationship to ‘predetermine’ how their assets should be dealt with in the event of relationship breakdown or death of one of the parties.
Entering into a binding financial agreement provides certainly and peace of mind by:
- protecting the ownership of assets bought into a relationship;
- protecting the ownership of special assets acquired during a relationship (including for instance any anticipated inheritance);
- protecting ownership and retention of business interests; and
- dealing with any related taxation and duty issues.
In addition, carefully prepared binding financial agreements will minimise lengthy, costly litigation in the event of a separation.
The Use of Financial Agreements
Historically the courts have ignored the wishes of parties set out in pre-nuptial agreements.
All of this changed in 1999 when laws were introduced to enable de facto couples to enter into Financial Agreements to take effect should they separate.
In 2000, the Federal Government followed suit and made changes to the Family Law Act to allow married couples to enter into Financial Agreements.
Since 2009, de facto couples have also been able to enter into Financial Agreements under the Family Law Act.
These days, Financial Agreements are being commonly employed to provide certainty and protection of assets and business interests in the event of a relationship breakdown.
In addition, a carefully prepared agreement will enormously reduce the stress and costs of financial settlement between parties.
Those who would potentially benefit most from such an agreement are those who have significant financial and/or business interests, those who are expecting inheritances or those wishing to protect a particular asset of significant financial or sentimental value to them.
In particular, the following people are advised to enter into a Financial Agreement:
- Anyone entering into their second marriage wishing to protect the assets they take into that marriage, especially if they wish to provide for children from previous relationships.
- Anyone with substantial assets who are in or about to enter into a relationship and who wish to protect their interests with certainty.
- Anyone who wishes to avoid the need for costly and stressful protracted litigation in the event of a separation.
You can elect to have a financial agreement that will deal with specific items of property only, or that deals with all property owned by you and your spouse. You can also incorporate into an agreement provisions that deal with maintenance of your spouse and/or children of your relationship.
The Benefits of Financial Agreements
Financial Agreements can:
- provide certainty;
- protect ownership of assets brought into a marriage/relationship;
- protect ownership of special assets acquired during a relationship (for example, an inheritance);
- protect ownership and retention of business interests;
- help prevent costly, lengthy litigation in the event of a separation;
- dealing with any related taxation and duty issues; and
- provide peace of mind.
Before a marriage or de facto relationship
You may choose to enter into an agreement before you commence living with your partner or before marriage. Entering into a new relationship is a good time to consider taking steps to protect your property interests.
During a marriage or de facto relationship
An agreement can be entered during the marriage or de facto relationship. Such an agreement is popular amongst those who have seen friends or family go through protracted and costly litigation following their separation, and who wish to avoid the same.
This type of agreement can also be entered into by those who have separated but have yet to divorce, although in these circumstances the parties may also be able to enter into consent orders and we would suggest you obtain legal advice as to which format would be more suitable to your circumstances.
Following divorce or de facto relationship separation
You may also enter into a financial agreement following divorce (or separation for de facto couples), although like separated married couples who have yet to divorce, you may instead elect to have your agreement encapsulated into consent orders.
What happens if you separate and do not have a financial agreement?
If you do not have an agreement in place, either you or your spouse can make a court application in the following circumstances:
- if you are married;
- if you have been living in a de facto relationship for two years or more; or
- if you have been living in a de facto relationship (for any amount of time) and
- have a child or children together; or
- one party made substantial contributions (including financial, non-financial and/or to the welfare of the family) and a failure to make an order would result in a serious injustice to the applicant.
The court has the power to make orders essentially as to who will retain what assets and liabilities of the relationship, which will include assets and liabilities held in your sole name, your partner’s sole name and in joint names. As a result, simply holding assets in your sole name will not protect you in the event of a separation.
We can help with current or future family law issues or estate planning matters.
Please contact our Accredited Family Law Specialist, Peter Pavusa on (07) 3252 5044 to discuss, or email Peter.Pavusa@merthyrlaw.com.au