Binding Financial Agreements.

1. When can a Financial Agreement be made?

For married couples, agreements can be made:

• before marriage — commonly described as a “prenup”;
• during marriage; or
• after divorce.

For de facto couples in participating jurisdictions, agreements can also be made before, during or after the de facto relationship.

2. What can it cover?

A financial agreement can deal with all of the financial relationship or only selected issues.

It can also specify that particular property remains with one party if the relationship later breaks down.

3. What does it not replace?

A Financial Agreement is about financial matters. It does not replace a parenting plan or parenting orders dealing with where children live, time with each parent or parental responsibility.

Child support is also governed by its own statutory regime and should not be confused with a Financial Agreement dealing with property or spousal maintenance.

4. What makes an agreement binding?

The requirements are technical.

Among other things:

• the agreement must be signed by the parties;
• before signing, each party must receive independent legal advice about the effect of the agreement and its advantages and disadvantages;
• each lawyer must provide the required signed statement confirming that advice was given;
• the required copy of that statement must be provided to the other party or their lawyer; and
• the agreement must not have been terminated or set aside.

5. Why do people use Financial Agreements?

They are commonly used to create certainty around financial arrangements, particularly where there are:

• assets brought into a relationship;
• children from an earlier relationship;
• a family business;
• trust or company interests;
• expected inheritances;
• a significant difference in wealth; or
• a desire to settle financial matters after separation without asking the Court to determine the division.

They are not limited to wealthy couples. The real question is whether the certainty offered by an agreement is worth the legal work and cost for the particular relationship.

6. Is a “prenup” different?

In everyday language, people often call an agreement made before marriage a prenup.

In Australian family law, the formal legal concept is a Financial Agreement. For a marriage, an agreement made before the wedding is generally made under section 90B of the Family Law Act.

The label “prenup” does not make an agreement binding — compliance with the statutory requirements does.

7. Financial disclosure still matters

One of the recognised grounds for setting aside a Financial Agreement is fraud, including the non-disclosure of a material matter.

For that reason, parties should expect their lawyers to require detailed and accurate information about assets, liabilities, superannuation, businesses, trusts, income and other relevant financial matters.

8. Can you simply amend it later?

Not safely by making handwritten changes or signing a casual variation.

The Family Law Act provides formal mechanisms for terminating a financial agreement. The parties can generally:

• terminate it through another qualifying financial agreement; or
• enter into a written termination agreement that satisfies the required legal formalities.

In practice, couples who want materially different terms often replace the earlier agreement with a properly drafted new agreement.

Independent legal advice is again central to the process.

9. When can a Court set a Financial Agreement aside?

A binding financial agreement is designed to provide certainty, but it is not immune from challenge.

The Court has statutory power to set an agreement aside in limited circumstances. These can include:

• fraud, including material non-disclosure;
• certain attempts to defeat creditors or other affected persons;
• circumstances making the agreement void, voidable or unenforceable;
• impracticability;
• a material change in circumstances relating to the care, welfare or development of a child that would cause hardship if the agreement were not set aside;
• unconscionable conduct; and
• certain trust or superannuation-related circumstances provided for by the legislation.

Whether a ground actually exists is highly fact-specific and should be assessed by a family lawyer.

10. Why timing and pressure matter

A Financial Agreement should not be treated as a document to present for signature immediately before a wedding or under intense pressure.

Both parties need a genuine opportunity to obtain advice, understand the agreement and consider its consequences.

Issues such as duress, undue influence and unconscionable conduct can become important if the agreement is later challenged.

11. Financial Agreement or consent orders?

After separation, couples who have reached agreement about property and finances generally have two main ways to formally document the outcome:

The better option depends on the circumstances, including tax, superannuation, maintenance, enforceability and the terms the parties want to achieve.

12. Spousal maintenance provisions need careful drafting

A Financial Agreement can deal with spousal or de facto maintenance, but maintenance provisions are subject to specific statutory rules.

A clause that says neither party will ever receive maintenance should not be assumed to work in every circumstance without careful advice about the legislation and the parties’ future financial position.

13. Example — protecting an asset brought into the marriage

The simple way to think about it