Q&A – Financial Agreements. Everything you need to know
What is a Financial Agreement?
A Financial Agreement, or more correctly, a Binding Financial Agreement, is one way that a married, or de facto couple, can formalise how they want their property to be treated in the event that they separate, or in the event that their relationship has already come to an end, can formalise an agreement reached about what will happen with their assets and liabilities.
When would I need a Financial Agreement?
A Financial Agreement can be entered into prior to a couple living together, or marrying, as well as during a marriage or relationship, or after the breakdown of a marriage or relationship.
Prior to a couple living together, or marrying, or during their relationship, they might want to decide what would happen in the event that they did separate.
If a couple has already separated, a Financial Agreement can finalise their financial relationship as far as practicable, and can outline how each parties assets, and their joint assets, are dealt with. The Financial Agreement can outline who is to keep what assets, and liabilities, and can also provide for certain assets to be transferred between the parties, or sold.
What can a Financial Agreement cover?
In short, a Financial Agreement can cover financial matters of the parties to the Agreement.
What can be covered differs slightly depending whether the couple is married, or in a de facto relationship, and when the Financial Agreement is entered into, be it prior to, during, or after a relationship or marriage.
Generally, Financial Agreements can deal with how to divide assets (including what is to happen to superannuation) and liabilities of either or both of the parties, as well as deal with their financial resources. Spousal Maintenance can also be dealt with in a Financial Agreement if the parties are married.
A Financial Agreement can make provisions for what is to happen to property owned by either or both of the parties. Property includes real property, cash and bank accounts, superannuation, investments, vehicles, house-hold items and furniture, as well as other entitlements such as insurance policies, compensation monies, and inheritances.
Who does a Financial Agreement benefit?
A Financial Agreement does not involve Court. This can keep legal costs down, but can also avoid unwanted public disclosures. This may be beneficial to couples separating in sensitive circumstances or have a reason to keep their affairs as private as possible.
A Financial Agreement prior to a couple marrying or living together can allow the parties to have some certainly about what would happen to their assets and liabilities in the event that they did separate in the future. Often, one party may have significant assets that they are bringing into the relationship, and they may want to protect those assets, or treat them differently to assets that arise during the relationship, or are purchased jointly with their new spouse.
Sometimes, people entering into second marriages or relationships later in life, may want to try to quarantine their assets so as to protect their children’s inheritances, or one party may wish to protect a family business, or their own future inheritance.
Can a Financial Agreement be overturned?
Yes, – and that it is why it is important that both parties obtain expert legal advice from a qualified and experienced family law lawyer.
The Court can set aside a Financial Agreement in the following circumstances:
- A party has not disclosed an asset, or some other material fact or circumstance;
- There has been dishonest conduct by one or both parties during the negotiation of the Financial Agreement;
- The Financial Agreement is technically defective;
- A party has not obtained independent legal advice;
- A significant change of circumstances, which would make it unfair to enforce the agreement, such as a child subsequently requiring a high level of care and support.
Do I need a lawyer for a Financial Agreement?
Yes, you do. Each party must have obtained independent legal advice prior to signing a Financial Agreement to comply with the legislation, and for the Financial Agreement to become binding.