We see a lot of what are known as pre-nuptial and post-nuptial binding financial agreements drafted by other lawyers, often using ‘boiler-plate,’ clauses many of which are non-compliant with the Family Law Act and likely to be set aside, if they were subject to challenge.
Binding financial agreements (BFA) can be very simple documents and also very complex documents in the case of complex financial settlements, which involve trust arrangements and multiple properties.
Binding financial agreements are the second way to formalise the end of the marriage or de facto relationship. The first way is by way of consent orders, which are filed in the Federal Circuit and Family Court of Australia.
For couples who may envisage having children or owning joint property, which might involve a transfer of interest in property, the agreements can become complex and therefore there is a need to ensure that the agreements are compliant with the Family Law Act.
Binding financial agreements in pre-nuptial circumstances can be very beneficial potentially for people entering relationships where they are perhaps not as certain as they might like to be regarding their commitment to their future partner. We look at some of the pros and cons of these agreements.
When can a pre-nuptial agreement be done?
Pre-nuptial BFAs made before or during a relationship can simplify the focus on practical and financial issues.
Trying to settle matters after separation can be more challenging and complicated due to the emotions are experienced alongside likely major lifestyle changes such as a changing residency. The difficulty is magnified when a separation is not a mutual decision made by both parties.
A pre-nuptial BFA help parties consider and agree on practical and financial issues in pre-emption of a potential separation, which accounts for the couples’ specific aims and priorities and greatly increases the prospect of achieving a just and equitable agreement.
How flexible can the agreements be?
Terms that are made parties as broad or as narrow as they see fit. The agreement could deal with one asset or could specify how the couple intends to divide all assets and income should they separate. It is an adjustable and adaptable document that will be tailored to fit the couples’ needs.
While a pre-nuptial BFA specifies how a couple intends to deal with future events, it is difficult to predict the future. Parties may feel different about an event occurring and something may happen that had not been previously thought of.
Nuptial agreements are adaptable as they can be terminated or a new iteration of the BFA can be entered into when the need arises, so long as parties have agreement on the amendments. Generally, such agreements include a provision to review or terminate the arrangement at specific intervals or upon certain events occurring such as when a couple has a child.
What are the advantages of a pre-nuptial agreement?
The benefits of BFAs are that they can save the parties money, time and stress.
If a couple divorces without having made a BFA, negotiations are necessary. Varying factors such as litigation can complicate the dispute resolution process.
This means that a settlement may not come to fruition for the parties for years, given the Australian family law system is entrenched with protracted delays, often causing the couple’s lives to go into limbo.
The costs of such negotiations, and especially litigation, are likely to be significantly more expensive than the cost of a BFA. Notably, the psychological and emotional effects and stress that this process has on parties means that nuptial agreements are a promising alternative.
While one party can dispute a BFA in court, this can act as a starting point for the division of assets in the event of separation. The court will consider if its terms are just and equitable and seek to ensure both parties are given the best available protection after a divorce or separation.
BFAs are increasing in Australia and are commonly viewed as a consideration akin to financial planning advice. Prior to entering into a BFA, independent legal advice must be sought to account for the couples’ individual needs and priorities. If you need advice o the terms of a binding financial agreement, please contact Rowan Skinner & Associates Lawyers for a no obligation consultation on (03) 9995 9155.