Whether it’s on an American TV sitcom, or in a Kanye West song, we’ve all heard the term “Pre-nup”. But what does this mean? And how do they work in Australia? Can they be used outside of contemplating a walk down the aisle?
On this side of the globe, we have Financial Agreements. This is a contract between two or more parties that can be entered into before, during or after a relationship.
We will focus on these “pre-nup” or “pre-nuptial” Financial Agreements. These are highly technical agreements made by parties before marriage under Section 90B of the Family Law Act 1975. The agreement can cover how any or all property and financial resources of the parties will be dealt with in the event of a separation. It can also cover what spousal maintenance, if any, will be paid between the parties. Other ancillary matters can also be included.
Importantly, Financial Agreements are being used more and more to protect assets that one person brings into a relationship, or the assets that one person will receive during their relationship at some point in time from family or some other source. This allows assets to be preserved for children of a previous marriage, as an example, children that are yet to be born or even extended family members.
The possibilities are near endless. There can be an entire quarantine of property or financial resources, or one party can acquire an incremental interest over time in the other person’s property, to adjust for the passage of time or even the pitter patter of tiny feet. Financial Agreements can be reviewed at an agreed time in the future, and they can even have an end date if this is what the parties agree on and want.
These agreements are not just for people contemplating marriage. There are different circumstances where couples can enter into this type of agreement, including:
- The couple is going to live together but there is no plan to get married
- The couple is going to live together and they do plan to marry, but have not decided when they will get married
- The couple is already living together
- The couple is already married
The Family Law Act 1975 outlines specific requirements that must be met to ensure that the agreement is binding and enforceable.
One of the requirements under the Act for a financial agreement to be binding is that both parties must be given independent legal advice before the agreement is signed. This is about the effect of the agreement on the party’s rights, and the advantages and disadvantages to that party of making the agreement. The lawyers need to sign certificates to this effect.
Both parties must engage their own lawyers. A common lawyer cannot be engaged by both parties for the purposes of a Financial Agreement, even if both parties are completely in agreement about the terms and what is to happen.
The law surrounding Financial Agreements is in an almost constant state of change in Australia. The legal fraternity is currently awaiting the outcome of a High Court case involving the issue of duress when parties sign these types of agreements. It is vitally important to ensure that the lawyer you engage has a high level of knowledge around the technical and practical aspects of this area of family law.
These are sensitive issues, with people’s relationships continuing to hopefully grow and flourish while we negotiate and draw these agreements up. Often there are many people involved and invested in the process on the outer edges, such as business partners, adult children and extended family members. As a result, these matters need to be handled with care by the lawyers concerned to promote harmony where possible, and avoid unnecessary conflict which could harm the relationship.
We work with a range of lawyers who we recommend to our clients’ partner or fiancés, who share our pragmatic approach and are highly competent in this area.
Talk to us today if you are considering an agreement for your relationship, no matter what stage it is at. We can discuss with you the many varied options for how such an agreement can work for you and achieve the level of asset protection you desire.