Parties who are either married or in de facto relationship (including same sex couples) can organise their financial affairs between them to avoid or limit future litigation arising from the breakup of the relationship.
Financial Agreements provide a means whereby parties can define their respective rights and obligations to each other and how property of the parties to the relationship (“the asset pool”) is divided in the event of a breakdown of the relationship.
A Financial Agreement properly entered into acts as a bar to any claim for property or spouse maintenance that either party can make against the other in the event of breakup of their relationship.
A Financial Agreement can be entered into at any time of the relationship whether in contemplation of entering into the relationship, during the relationship or upon breakup of the relationship.
There are certain provisions under the Family Law Act (“the Act”) which must be adhered to when preparing the Financial Agreement. The Court may interpret those provisions strictly and any non-compliance may lead to the Financial Agreement being set aside.
There is, however, discretion within the provisions of the Act whereby the Court while finding non-compliance with the Act may, in certain circumstances, if satisfied that it would be unjust and inequitable to do so, order that the Agreement should nevertheless bind the parties.
The Financial Agreement operates despite the death of the party to the Financial Agreement and binds the legal representative of the deceased in relation to all obligations under the Financial Agreement. The Financial Agreement is not to operate upon death and this must be specifically stated.
A Financial Agreement can be terminated if the Agreement itself provides a termination clause on a particular event or a termination agreement is made terminating the provisions of the Financial Agreement.
The Financial Agreement can deal with property and financial resources including superannuation and incidental or ancillary matter. Financial Agreements also deal with spousal maintenance during and after the relationship has broken down, that is it can oust the jurisdiction of the Court for either party to claim spouse maintenance against the other. Spousal maintenance provisions must specifically refer to the amount provided or the value of relevant property attributable to the maintenance of the party.
A Financial Agreement may be set aside by the Court pursuant to specified grounds in the Act. Those grounds include:
- The terms of the Financial Agreement were obtained by fraud including non-disclosure of material matters.The Financial Agreement is void, voidable or unenforceable. A Financial Agreement is held to be void for uncertainty, incompleteness or in some circumstances by mistake whereas a Financial Agreement can be pronounced void by one of the parties or held to be void by a Court. In other words, the Financial Agreement continues until the other party or the Court pronounces it to be void.
- A Financial Agreement may be valid but unenforceable for a number of reasons. A Financial Agreement can be set aside due to duress, undue influence of unconscionability.
Among the issues that a Financial Agreement may cover include:
- Whether the parties will retain their respective assets (including overseas assets) existing as at the commencement of the marriage.
- Retention of any respective inheritances by either party received pre and during marriage and post separation.
- Gifts by each to other and by others to each other be retained by the donee of the gift.
- The financial support in the event of children.
- What property will either party receive in the event there are children of the marriage?
- What accommodation arrangements will be in place for the children and the prime carer?
- What assets or payment in lieu of assets is each party to receive on separation?
- Is (g) above dependent on the length of the marriage? In other words, is the value of assets to be retained on separation to be assessed pro rata the length of the marriage?
- What provisions are to apply in the event there are no children and the marriage lasts say 5 or 10 years or more?
A Financial Agreement must meet strict compliance requirements under the Act including the statement by each party that prior to the Financial Agreement being signed, independent legal advice was provided by a legal practitioner to the party regarding:
- The effect of the Agreement on the right of the party.
- The advantages and disadvantages at the time the advice was provided.
- A statement is annexed to the Agreement signed by the solicitor providing the independent legal advice to confirm the advice was provided.