Binding financial agreements – are they really binding?
It is all good and well to write out and sign a prenup, but if it is not legally valid then the court still has the power to make different financial orders.
There are strict legal guidelines relating to binding financial agreements:
- The first begins with advice from a lawyer. Each party must obtain independent legal advice from a lawyer practicing in the Australian jurisdiction. This is a requirement for the binding financial agreement to be valid.
- Secondly, the prenuptial agreement must be in writing.
- It must be signed voluntarily by both parties, without coercion or duress. An example of coercion or duress would be one person in the relationship telling the other that they will not marry them if they do not sign the prenup. If someone signs the prenup on the day of the wedding, this is also considered as under duress.
- The prenup must contain a full disclosure, including all assets and their full value, of each party’s financial position.
- It must not be made on a fraudulent basis.
If any of these requirements are not fulfilled, the court has the authority to overturn the financial agreement.
As mentioned in the previous section, the court has the authority to overturn a prenuptial agreement if it made no provisions for children of the relationship.
Depending on the circumstances, the court may choose to enforce only part of the financial agreement.
Different types of financial agreements
There are different types of financial agreements depending on the nature of your relationship. It is important that you make an agreement that is suitable for your circumstances.
The different types of financial agreements depend on the type of relationship you have and at what stage you are making the financial agreement:
- If you are a couple who is wanting to live together in a de facto relationship but are not living together yet, you would enter into a Section 90UB Cohabitation Agreement.
- If you are a couple living together in a de facto relationship, you would enter into a Section 90UC Cohabitation Agreement.
- If you are a couple who is intending to marry, you would enter into a Section 90B Pre-Nuptial Agreement.
- If you are a couple who is already married, regardless of whether you intend to stay married or separate, you would enter into a Section 90C Post-Nuptial Agreement.
- If you are a couple who has separated, you would enter into a Separation Agreement. There are different forms of Separation Agreements.
- Section 90UD is for a de facto separation
- Section 90D is for separation if the parties were married
- If you are already divorced, and you want to document property settlement matters in a Binding Financial Agreement, you would enter into a Section 90C Divorce Agreement
What you should look for when hiring a prenup lawyer Sydney
When hiring a prenup lawyer, you will want to know that if they are a specialised divorce lawyer that has previous experience drafting prenups.
Prenups don’t have the best reputation in Australia.
This is largely because many legal practitioners may ‘dip their toes’ in the world of prenups and offer it as a service, but aren’t familiar with the latest laws surrounding them.
It is really important that you engage a law firm that is proficient in prenups, and have the experience to assure you that the agreement will be binding.
What sort of legal advice will you receive?
Making an appointment with a prenup lawyer is one of the legal requirements of drafting and signing binding financial agreements in Australia. Each party must obtain legal advice from a different lawyer that specialises in prenuptial agreements in Australia.
The lawyers will advise their respective clients of the prenuptial agreement’s effect on their rights, along with the advantages and disadvantages that signing the prenup will have for each party.
Furthermore, legal advice includes being told exactly how necessary the agreement is for that person and whether the proposed division of property detailed in the prenup is just and equitable for them.
In order to receive legal advice tailored to their situation from the very beginning, each party should prepare their basic financial and personal information for the lawyer they are seeing.
This information includes:
- A list of their assets and liabilities (including superannuation, businesses, pension entitlements) with estimated values, and those of their partner;
- The details of their employment and salary, and those of their partner;
- Most recent tax return and bank statements;
- How they would want their property, superannuation, spousal maintenance and child support to be divided in the event of a relationship breakdown;
- Full name, date of birth, contact details.
What Legislation Covers binding financial agreements in Australia?
Binding Financial Agreements in Australia are covered separately in the Family Law Act 1975. Sections 90B to 90KA set out the legislation for married couples and financial agreements.
There are different sections about agreements made before and during a marriage, as well as after divorce orders.
The legislation provides the rules for setting aside financial agreements, the elements that make them legally binding and enforceable and even what happens if one party to the financial agreement dies.
If a couple made a financial agreement and then one of the parties dies when the agreement is still in effect, the agreement continues to operate.
It is now binding on the legal personal representative of that person’s estate.
Sections 90UB to 90UN relate to financial agreements and de facto couples.
These sections are very similar to those relating to married couples. Legislation regarding financial agreements made after the breakdown of the de facto relationship is included instead of after divorce.
The Act is very specific, for example in relation to the mention of children in prenuptial and financial agreements. Sections 90E and 90UH provide the information for married and de facto couples respectively about child support and spousal maintenance.
Mentions of these in prenups are only legally valid if the person to be supported (the spouse or child) is named and the amount provided for them is specified