What is a Financial Arrangement?
A Financial Agreement—often referred to as a “pre-nup” or a “Binding Financial Agreement”—is a contract between two parties that outlines how their property will be divided in the event of their separation, which can be entered into at any time.
As such an agreement is entered into by both parties freely, the intended effect is to set aside the jurisdiction of the Family Law Act. The Family Law Act provides that any division has to be “just and equitable”. As a Financial Agreement sets this aside, the division outlined in the agreement does not have to be “just and equitable”. It is often that only one party (the financially stronger party) will benefit from such an agreement and the other party will be worse off as a result.
Due to the imbalance that these agreements can create, and the complex legislation involved, there is now strong authority for these agreements to be set aside in various circumstances. Each couple’s set of circumstance should be individually considered to determine if a Financial Agreement will be beneficial to them:
Times when a Financial Agreement can be beneficial:
- When you have assets of significance which you want to protect (e.g., a house or inheritance)
- When you are unlikely to have any children of your new relationship
- If you already have a Financial Agreement and a new circumstance has arisen (such as the purchase of a new property or having a child)
- When you are amicable, the agreement has been well thought through, and the residency of either partner is not an issue
- When you intend on keeping your assets separate from your partner
Times when a Financial Agreement can be detrimental:
- If you are making contributions (such as mortgage payments or renovations) to a property that you do not own.
- You are contemplating having children with your partner
- You feel pressured into signing such agreement or have been given an ultimatum to do so
- You cannot read, have poor English skills, are inebriated or lack mental capacity
- If the Agreement is rushed and there is no time for proper consideration/negotiation especially just prior to a commitment such as marriage or cohabitation
- When you are the financially disadvantaged person – why opt out of a “just and equitable” outcome?
The usefulness of a financial agreement will be dependent on the circumstances of each couple. If you are interested in entering a financial agreement or have been asked to enter into one by your partner, get in touch on (02) 6331 2911 or email b.patterson@kennyspring.com.au to find out whether it is the right option for you.
FAQs
Can a binding financial arrangement be set aside?
Yes – section 90K and 90UM in the Family Law Act outline the circumstances when the Agreement can be set aside.
Can you create your own binding financial arrangement without a lawyer?
No. It is a requirement that both parties receive independent legal advice prior to entering into the Agreement. Also, strict compliance with the Legislation is required to ensure it cannot be set aside, therefore, all Agreement should be drafted by experienced family lawyers.
Should I enter into a binding financial arrangement after separating?
Usually, the best way to formalise a property settlement is via Consent Orders not a Financial Agreement, because Orders are enforceable and the Agreement is not.
Are binding financial arrangements useful for de facto couples?
Yes! Couples who are not married can also enter into a Financial Agreement before they commence their relationship, during the relationship and after separation.
Do I need a Will if I have a Binding Financial Agreement?
Yes, the documents have different functions. A Financial Agreement deals with the division of assets upon separation. A Will outlines your wishes for how your estate will be divided upon your death. It is usually always in your best interests to have an updated Will whatever your circumstances.
What’s the difference between a binding financial arrangement and a court order?
The primary difference is that a Financial Agreement is not enforceable. To make it enforceable, the parties must first apply to the court to prove it is a valid contract before the court can enforce the contents of the Agreement. However, a Court Order is automatically enforceable and usually prevents the other party from coming back and seeking more money and a “second bite of the cherry”.
Beatrice Patterson | Solicitor
Beatrice is the resident family law expert at Kenny Spring and has in-depth experience and knowledge in all areas of family law.
Beatrice is known for her adaptive approach. She has resolution-focused mindset and also is a powerful advocate for her clients. Her wealth of experience and commitment to effective representation and pragmatic solutions make her a trusted ally in family law.
If you, or someone you know, needs Beatrice's help get in touch on (02) 6331 2911 or email b.patterson@kennyspring.com.au