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Pre-nuptial and Binding Financial Agreements - Important Facts You Need to Know

  1. Overview of Pre-Nuptial/Binding Financial Agreements

    On 27 December 2000, Part VIIIA was introduced into the Family Law Act. This part deals specifically with "Financial Agreements" and provides for specific provisions for parties to enter into Financial Agreements, both before, during and after marriage.

    A Financial Agreement can now be entered into by couples who are contemplating entering into a marriage with each other. The Agreement can deal with how, in the event of a breakdown of the marriage, all or any of the property or financial resources of either or both of them at the time when the Agreement is made or at a later time and before the dissolution of marriage is to be dealt with. The Agreement can also deal with the maintenance of either party during the marriage or after dissolution of marriage or both during and after dissolution of marriage.

    A similar Financial Agreement can also be entered into by couples during a marriage but before divorce. Once again this Agreement can deal with how, in the event of the breakdown of the marriage, all or any of the property or financial resources of either or both of them at the time the Agreement was made or a later time during the marriage is to be dealt with and it can also deal with the maintenance of either party.

    Finally, Financial Agreements can be entered into by couples after the dissolution of their marriage dealing with how all or any of the property or financial resources of either or both of them that they had or acquired during the former marriage is to be dealt with and once again can also deal with the maintenance of either party.

    These amendments to the Family Law Act signal a significant change and development in Relationship Law in Australia.

    For the first time, couples either before or during a marriage can enter into a binding contract to deal with how their property is to be divided in the event of the eventual breakdown of their relationship.

    We have commonly come to know a Financial Agreement entered into before marriage as a "Pre-Nuptial Agreement". The ability of couples to also enter into Agreements once they are married but before they are divorced is a new concept and one not recognised in many overseas jurisdictions that whilst allowing binding Pre-Nuptial Agreements do not recognise Agreements once parties are married.

    In order for a Financial Agreement to be binding under the Family Law Act, the Agreement must meet certain criteria set out in the legislation including:

    • The Agreement must be signed by both parties;

    • The Agreement must contain, in relation to each party, a statement to the effect that the party to whom the statement relates has been provided, before the Agreement was signed by him or her as certified in an annexure to the Agreement, with independent legal advice from a legal practitioner as to the following matters:

      • The effect of the Agreement on the rights of both parties;

      • Whether or not at that time when the advice was provided it was to the advantage financially or otherwise of that party to make the Agreement.

    • The annexure to the Agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided; and

    • The Agreement has not been set aside by a Court; and

    • After the Agreement is signed the original Agreement is given to one of the parties and a copy is given to the other.

    If the Agreement satisfies the above criteria, then it is known as a Binding Financial Agreement.

    It is to be noted that a Binding Financial Agreement continues to operate despite the death of a party to the Agreement and operates in favour of and is binding on the personal representatives of that party.

    A Binding Financial Agreement can only be terminated (during its operation) by the parties entering into another written Agreement known as a Termination Agreement.

    A Court may make an Order setting aside a Binding Financial Agreement if, and only if, the Court is satisfied that:

    • The Agreement was obtained by fraud (including non-disclosure of a material matter); or

    • The Agreement is void, voidable or unenforceable; or

    • If circumstances that have arisen since the Agreement was made make it impracticable for the Agreement or part of the Agreement to be carried out; or

    • Since the making of the Agreement a material change in circumstance 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 where the Applicant has the care and responsibility for a child, a party to the agreement will suffer hardship if the Court does not set the agreement aside; or

    • In respect of the making of a Binding Financial Agreement, a party to the Agreement engaged in conduct that was in all the circumstances unconscionable.

  2. Why Should You Enter into such Agreements

    The advantages for couples entering into such Agreements are:

    • To provide certainty;

    • To protect ownership of assets brought into a marriage/relationship;

    • To protect ownership of special assets acquired during a relationship (for example, an inheritance);

    • To protect ownership and retention of business interests;

    • To prevent costly, lengthy litigation if the relationship does breakdown;

    • To provide piece of mind to couples in a relationship in relation to financial matters in the event of their relationship breakdown;

    • Because such Agreements will be binding on the estate in the event of death.

  3. Who Needs an Agreement Most


    The people who would potentially benefit most from such an Agreement are:

    • People entering into their second marriage, to avoid the stress and cost associated with the potential breakdown of their second marriage and to provide for pre-existing children;

    • Couples employing asset protection. For example, where couples put all personal assets in the Wife's name, an Agreement can be filed acknowledging the Husband's financial interest regardless of whose name the property is in;

    • People with substantial assets who are already in a relationship and who need to protect their interests and require certainty;

    • People who have substantial assets and who are about to enter into a relationship;

    • People entering into second or subsequent relationships/marriages.

  4. Cost of Agreement


    If you are interested in these Agreements, we recommend you make an appointment with us to discuss your particular needs and individual circumstances."

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