Pre nuptial agreements and Financial Agreements

Pre nuptial agreements &Financial Agreements

(During a relationship)

Pre nuptial agreements aren't just found in America. Under Australian law they go by a different name, look different and act differently. They are still similar to what you may have heard called a 'pre nup'.



These agreements are very unique and require an experienced family lawyer who understands both the law and can understand your personal circumstances. Our team would be honoured to help.

What is a pre nuptial agreement?

In Australia, they are known as a Binding Financial Agreement which is made during a relationship. This is an agreement entered into freely by two parties to a relationship prior to any separation or divorce. Binding financial agreements set out the intention of the parties if they separate in relation to the division of their property interests, and if they decided to include it, matters such as spousal maintenance. The agreements are made under the Family Law Act and enable parties to agree to avoid the usual property settlement process which is enacted after separation.


Parties can enter into a financial agreement if they are married, in a de facto relationship, or in a civil partnership.



These agreements differ from a postnuptial agreement which are entered into after separation.

What can be included in financial agreements?

We often see financial agreements which set out that property (assets and liabilities) which parties accrued prior to the making of the agreement, or prior to the commencement of the relationship, are to remain separate property in the event of a separation. This is not always the case, and careful consideration should be given to what you are trying to achieve by entering into the agreement.


For instance, what is the intention of a family business which is the property of one party prior to the relationship, but to which you both work in? What are the future arrangements for your relationship likely to be? What sort of financial resources and financial support do you each have which will carry into the future?



The Family Law Act sets out that the usual property settlement process includes an assessment of the financial and non-financial contributions of each of the parties. It is important when you are entering into a financial agreement that you consider the financial and non-financial contributions that each of you have made, and are intending to make so that our agreement can properly include these matters.

Interested? What are the next steps?

Generally, the process of entering into a financial agreement (during the relationship) will generally follow the following steps.

  1. Book an appointment with an experienced family lawyer to obtain some initial advice about the process.
  2. Gather and exchange disclosure. Your lawyer will set out the documents and information that you need to provide so that you have met your disclosure obligations. The other party will also have to provide their own disclosure materials as well. We recommend that you also choose to have all property to be listed in the agreement valued by an independent valuer.
  3. Drafting the agreement. Your lawyer will now attend to drafting the agreement in accordance with your wishes. If your circumstances require it, then your lawyer will work collaboratively with other practitioners such as your accountant, or tax advisors.
  4. Finalise the agreement. Your lawyer and the other party's lawyer will discuss amendments and changes required prior to signing.
  5. Independent Legal Advice. Each party will then separately attend upon their lawyers to obtain independent legal advice which meets the requirements of the Family Law Act.
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Frequently Asked Questions

Are pre nuptial agreement kits valid in Australia?

No. There are a number of important steps which must be undertaken in order for a Binding Financial Agreement (the Australian version of a pre nup) to be legally binding. One of those requirements is that you obtain independent legal advice. Speak to a properly trained lawyer and they can take you through the process, as well as providing the necessary legal advice.


Are pre-nuptial agreements legally binding or enforceable?

The Family Law Act 1975 sets out a number of requirements which must be met, in order for a Binding Financial Agreement to be valid and binding. Remember: prenuptial agreements in Australia are called financial agreements (made during the relationship).


Can you get a pre-nuptial agreement before you get married?


Yes, you can. Chat with one of our solicitors today to make sure that all of the technical points are met and your financial agreement is valid and legally binding.


How much does a pre nup cost in Australia?


It really depends on the lawyer you engage as each lawyer and law firm have their own fees. It also depends on your personal circumstances, and the complexity of your arrangements. As a very broad estimate, you could be paying anywhere between $4,000 - $10,000 for each lawyer. Each party has to be responsible for their own legal costs, unless an agreement is reached otherwise and it is included in the financial agreement. Typically, the person who has their lawyer prepare the financial agreement will have a higher fee than the other.


Do I need advice from a specific type of lawyer for it to be legally valid?


You need to see and receive independent legal advice from a suitably qualified legal practitioner. In Australia this is a lawyer who is admitted to the High Court of Australia and holds a current, valid practicing certificate. We recommend you engage a lawyer who is knowledgeable and has experience in family law. Whilst not necessary, a family lawyer is going to have more of an understanding of the process, and requirements.


When does a financial agreement end?


The agreement ends at the earlier of either: the parties separate and enact the terms of the agreement freely, one party dies, the Court overturns the agreement, or the parties' agree by entering into another legally binding financial agreement.


Why do people not enter into a pre nuptial agreement (financial agreement)?


There are a few main reasons that people do not enter into a pre nup. It is a costly exercise and it is complex. Without following the requirements strictly, the agreement can be overturned by a Court at a later date. People often report that they do not want to bother with compliance, or that they have agreed so they want a simple process which effectively cuts corners. Whilst this will get you an agreement, it is less likely to be a valid and binding financial agreement and will cost you more in the long run.


Should I review or update a prenuptial agreement?


Unfortunately, prenuptial agreements are rarely a 'one and done' type of deal. Prenuptial agreements are prepared with only the information available at the time, and the best guess about what might transpire in the future. There is no crystal ball, and no way to be sure. Will you have children? Will you work until 65 or 75? Will you both take parental leave and take care of the children, or will that be primarily the responsibility of one person in the relationship? The list goes on. 


To account for the circumstances in your relationship as they change, we recommend you review and consider the terms of your prenuptial agreement every 3 - 5 years. We recommend and encourage you to update your prenuptial agreement when there have been any significant changes to your circumstances for instance, you buy or sell property, open a family business, have children, change your employment drastically. Doing these reviews and updating your agreement, can also assist to ensure a greater likelihood of your agreement's validity. 


What are the reasons a Court might overturn a binding financial agreement?


There are many reasons, and the case law is continuously changing and developing. The most common reasons include failing to provide proper disclosure or identify assets and financial resources. Whilst binding financial agreements do not have to strictly follow the steps undertaken for a full property settlement under the Family Law Act, the agreement needs to not be so far outside of the range of what you ought expect or be entitled to if the matter did proceed to trial.

PROPERTY SETTLEMENT PROCESS

The Family Law Act sets out the process to be undertaken to identify the entitlement of each party to financial assets and liabilities after the breakdown of their relationship. A common misnomer is that there is an automatic 50/50 division of assets between the parties. This is not the case. Instead, the Courts apply a step by step process. 


Stage 1 - Is it just and equitable to alter the parties property interests?


For many people, this question may seem silly. If you have been married for 15 years, have 3 children and joint assets, then this step is really just a check box. However, in some circumstances where relationships are more grey than black and white, and the financial resources of the parties have not been pooled, this can be a significant question that is considered at great length during the process. The particular nature of the property pool between the parties can also give rise to additional consideration to this question.


Part of this decision can include determining if the parties were in fact in a de facto relationship, if this is an issue in dispute. It is not always clear whether the parties were in a de facto relationship. 


If the parties agree that it is just and equitable to alter the parties' interests, or the Court determines it is, then you proceed to the next steps to establish the property settlement.


Stage 2 - What is the property pool to be divided between the parties?


This involves the identification of the value of the assets, liabilities and other entitlements that would form what is known as the net asset pool.


These items include those in your sole name, your ex-partner's sole name, joint names, or the portion that you own in property owned jointly with other third parties.


Assets includes houses (including the family home and investments) and land (metro, rural, investment and your principal place of residence), shares, boats, motor vehicles, motorbikes, plant and equipment, tools (including tools of trade), business interests, and superannuation.


Liabilities can include mortgages, personal loans, credit cards, charge cards, HECS or HELP debts, AfterPay, Zippay, Zip Money and any other debts such as a debt to a family member.


It is important to note that the assets and/or liabilities are often included regardless of whether you or your spouse knew about their existence.


During the property settlement process, all parties have an ongoing obligation to provide disclosure of relevant information and documents. This extends to material and information which enables the property pool to be properly identified.


Stage 3: What are the contributions to the acquisition of the property pool by each party?


This involves an assessment of the financial and non financial contributions made at the commencement and during the course of the relationship. The usual approach of the Court will be to make a percentage finding in this regard, as well as taking into account the contributions made to the acquisition, conservation and improvement of property and the contributions to the welfare of the couple. It is important to note that this is not a mathematical calculation, but a holistic assessment of all contributions.


Financial contributions to the property pool include things such as wages, compensation payments, lottery wins or other windfalls, owning a property at the commencement of your relationship, inheritance payments or gifts from family and friends.


Non financial contributions to the property pool include things such as upkeep and maintenance to a property, caring for children, caring for your former partner's children.


Stage 4 - What are the future needs of each of the parties?


 This places a focus on additional factors, for example each person's future economic position or any disparity in income earning potential, the age and state of health of each of the parties, as well as the effect the Orders will have on providing a reasonable standard of living for each of the parties. At this stage, there is also consideration given to the children of the relationship and their circumstances. For instance, if they live primarily with one parent, then this can be taken into account.


Stage 5 - Is the proposed division just and equitable in all of the circumstances?


This ensures that any distribution of the property pool is done so on a just and equitable basis.


To do so requires confirmation that the resolution is practical and fair, and can include a consideration of any other matters at the discretion of the Court. For instance, this could include consideration of things such as tax implications, or the loss of an ability to work due to the proposed orders (ie. they require the sale of a self employed business).

Costs

$1,100 - $1,430 professional fees for a standard Application for Divorce

$2,200 - $3,300 Plan where no negotiations required

$3,300 - $4,400 – advice on a pre-prepared Binding Financial Agreement


Payment plans available

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