Binding Financial Agreements | Family Law
Posted by Family Lawyers Mackay on April 2nd, 2021
Some helpful advice if you are considering entering into a Financial Agreement.
Financial Agreements under the Family Law legislation are not simple agreements, especially for same-sex couples. There are certain requirements that must be complied with if the agreements are to be binding. If these requirements are not properly dealt with the Court will have no hesitation in overturning a Financial Agreement should either you or your partner in the future not wish to be bound by its terms.
Solicitors are required to advise the parties entering into a Financial Agreement on the advantages and disadvantages of entering into those agreements. The parties sign a certificate attached to the agreement that they have received this independent legal advice. The solicitors also sign certificates stating that they did provide the advice required prior to the parties signing the agreement.
The advice not only deals with the terms of the agreement itself but also provides full advice on the legislation under the Family Law Act and the positions the parties would be in if they had not entered into the agreement.
Agreements are drafted to suit the particular circumstances of each case. The agreements come under different sections of the Family Law Act depending on whether the parties are in a de facto relationship and wish to remain in that relationship if the parties are in a de facto relationship and intend to marry, an agreement during marriage and also an agreement after a divorce setting out the terms of a property settlement dealing with the financial issues arising from the breakdown and the divorce in the marriage
When drafting the agreement and to enable a solicitor to provide the required advice it is necessary to obtain detailed instructions of the relationship, contributions made by the parties at the commencement of the relationship, and contributions made by the parties during the relationship. Without these instructions, full and proper advice cannot be provided.
Once a client’s instructions have been obtained in regard to the relationship and contributions it is then necessary to obtain the detailed instructions in regard to the wishes of the parties in regard to assets they wish to maintain full and legal control over and those assets which are to be joint assets. Instructions are also required in regard to superannuation, estate rights and spousal maintenance should the relationship breakdown or if there is a death of one of the parties.
Once the agreement has been drafted setting out the parties’ joint instructions to their respective solicitors it is then necessary to provide detailed advice on the terms of the agreement reached and on the advantages and disadvantages of entering into that agreement.
Unless all these steps are carried out and proper advice given there is a strong possibility that the agreement would be overturned by the Family Court if a party upon separation wishes to set aside the agreement and seek a greater property settlement than that set out in the agreement itself.
It is necessary for both parties to provide schedules setting out their present assets, liabilities, and resources including superannuation. The updated schedules are required to be attached to the Financial Agreement itself.
It is to be hoped that the parties agree on the values of the items set out in the schedules without requiring formal valuations to be carried out. The solicitor acting for the other party is required to give the advice that have been mentioned.
It is necessary that the other party obtains advice from a competent family lawyer and receives detailed advice in writing. There are many cases where the agreements have been set aside when the partner has not obtained that detailed advice.
WHAT ARE THE ADVANTAGES OF ENTERING INTO A POST-NUP, PRE-NUPTIAL AND FINANCIAL AGREEMENTS?
However, it is necessary that the original agreement is given to one party and that a true copy given to the other party. It is also necessary that the financial agreement is stored with a person’s important documentation. The agreement does not come into effect until sometime in the future when a separation occurs and this may not be for a considerable number of years. Therefore there is an obligation on the parties to maintain the financial agreement in case it does become relevant at some future time.
It is advisable to define clearly the spousal maintenance to be paid should a separation occur.
However, the parties should be aware of the provisions of section 90F of the Family Law Act and other provisions where there is a de facto relationship. These provisions state:–
WHAT ARE THE DISADVANTAGES OF ENTERING INTO A BINDING FINANCIAL AGREEMENT
Disadvantages of entering into a financial agreement:
BINDING FINANCIAL AGREEMENTS MAY BE SET ASIDE UNDER THE PROVISIONS OF THE FAMILY LAW ACT
The Family Law Act 1975 provides that a financial agreement will “end” in two circumstances. It can be either “terminated” under s90J or 90UL or “set aside” under s90K or 90UM. Termination is an action of the parties but setting aside is an action of the court. A court may set aside an agreement if it is “void, voidable or unenforceable”. If this ground is used, the parties or one of them may already consider that the agreement no longer operates. A party may apply to the court for an order that a financial agreement is set aside in circumstances where that party already believes that the contract has been rescinded, breached, or is otherwise unenforceable.
If, and only if, the court is satisfied that:
(a) The agreement was obtained by fraud (including non-disclosure of a material matter); or
(aa) A party to the agreement entered into the agreement:
(i) For the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or
(ii) With reckless disregard of the interests of a creditor or creditors of the party; or
(ab) A party (the agreement party ) to the agreement entered into the agreement:
(i) For the purpose, or for purposes that included the purpose, of defrauding another person who is a party to a de facto relationship with a spouse party; or
(ii) For the purpose, or for purposes that included the purpose, of defeating the interests of that other person in relation to any possible or pending application for an order under section 90SM, or a declaration under section 90SL, in relation to the de facto relationship; or
(iii) With reckless disregard of those interests of that other person; or
(b) The agreement is void, voidable, or unenforceable; or
(c) In the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out; or
(d) Since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare, and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside; or
(e) In respect of the making of a financial agreement–a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable; or
(f) A payment flag is operating under Part VIIIB on a superannuation interest covered by the agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement under that Part; or
(g) The agreement covers at least one superannuation interest that is an unsplittable interest for the purposes of Part VIIIB
In some respects, a financial agreement is easier to set aside than consent orders and in other respects, they are harder.
A financial agreement is enforceable after the death of a party to the agreement. Sections 90H and 90UK provide that a financial agreement:
“continues to operate despite the death of a party to the agreement and operates in favour of, and is binding on, the legal personal representative of that party”.
ENDING A FINANCIAL AGREEMENT – TERMINATION AND SETTING ASIDE
The parties may terminate a financial agreement by:–
Article Source: Binding Financial Agreements
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Joined: December 1st, 2018
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