FAQ about financial agreements and property settlement

No.  If you have already received legal advice on your Agreement, you need to get current legal advice, taking into account the changes you want to make, before you can sign your Agreement.

If you have already signed and finalised your Agreement, unfortunately, you will need to make a fresh Financial Agreement which incorporates the changes you want, and contains a clause which terminates your old Agreement.  And yes, this means you will need to obtain fresh legal advice on your new Agreement with the changes, before you sign it.

You must receive independent legal advice from a legal practitioner who does not act for the other party which means that you both can’t use the same lawyer.

This ensures that your legal practitioner will act in your best interests, and is unaffected by any competing or conflicting interests of your partner.

You should be able to safely and freely discuss your situation with your lawyer, knowing that any communications you have, will remain strictly confidential. See the article Should my Family Lawyer finalise my Financial Agreement?

A certificate of independent legal advice is a statement by a lawyer that a party has received legal advice on certain matters, and that the lawyer is independent of and not associated with the other party.

In order for a financial agreement to be enforceable and binding, the Family Law Act stipulates that both parties must obtain independent legal advice and that certificates of independent legal advice (sometimes referred to as solicitor’s statements) be completed.

The disadvantage of making a Binding Financial Agreement is that you give up the right to have a Court decide for you, about the matters you have dealt with in your Agreement. This means that the court cannot take into account matters which it otherwise would because you have decided to control your own affairs.

For example, lets say you have stated in your agreement that “each party will retain all their right title and interest to their superannuation entitlements and have no further claim on the entitlements of the other.” You can’t then change your mind and ask the court to make a decision about giving you a piece of the other persons Superannuation, without first attempting to have the agreement set aside.

No, both terms relate to the same written instrument or contract.  Binding Financial agreements were first introduced into the Family Law Act in 2000. In 2008 the law makers decided to drop the use of the term Binding Financial Agreement and subsequently replaced it with simply Financial Agreement.  Some legal practitioners still refer to the agreements as BFA’s but ultimately either term is acceptable.

We get calls each week from customers wanting to make prenuptial and other financial agreements. Often they have shopped around, and can’t understand why they are being quoted costs sometimes as high as $10,000 or $20,000. Your quote may have been significantly less than this, but there is a reason for the disparity.

There is a level of concern among the legal profession that financial agreements are risky instruments. This concern is particularly directed at those Agreements that do not come into effect immediately, but rather, at a later point in time when there is a breakdown of the relationship (ie. pre-nuptial agreements or agreements made during the course of the relationship).

If we use the example of a couple who are planning on getting married, a prenuptial agreement entered into today, may never be needed, or it may not be called upon until many years later. That is because the agreement will not come into effect until after the relationship has broken down and this could be 10, 20 or even 30 years down the track. At that point, circumstances may be completely different than originally contemplated or anticipated by the parties, and if either party is unhappy with the terms they have previously agreed to, they may decide to make an application to the court to have it set aside.

Even though the parties have agreed to the terms of the agreement as a substitute for court action, they still have the option of asking the court to set aside the agreement in limited circumstances. These circumstances are listed in section 90K of the Family Law Act. If such a challenge is successful (and remember, you must have an extremely valid reason to challenge the agreement), the solicitor is usually the easiest target to attribute the blame, and bear the brunt of the dissatisfaction of the party who was seeking to rely on the agreement.

So here’s the rub

Some lawyers won’t draft financial agreement because they believe the risks are too high for themselves (not you) and consequently those who have a higher appetite for risk charge a premium, often in direct proportion to the depth of the pockets of the client in order to cover the risk. That is, the greater the wealth of the client the higher the cost of the agreement.

This doesn’t necessarily mean that the agreement drafted to protect the assets of a wealthy individual is any more complex than that of someone of more modest means. Of course, that may be the case to a degree, but it is usually just the assets and liabilities statement that has a few extra lines to it.

So what do you do? Throw your hands in the air and do nothing? Run the gauntlet? Or is there another solution? Maybe put everything into a family trust? Unfortunately, when it comes to family law matters, assets you control but don’t actually own (such as those held in trust) all go into the pot if you do have to divide your financial resources.

Because family disputes and court action cost individuals and the community millions of dollars each year, successive governments via the Family Law Act have provided financial agreements as a vehicle to keep people out of the court system. They are the only option you have if you want to quarantine assets from future claim.

People are often motivated to preserve and protect assets for the benefit of children from a previous relationship. Used in conjunction with a sound estate planning strategy, a financial agreement may be the only option you have to minimise the chances of a challenge to your Will by a spouse under family provision legislation.

Of course, there are many other reasons why people might consider using a financial agreement.

The Family Court has demonstrated a willingness to see financial agreements upheld, where it can be demonstrated that the parties have been completely honest with each other and the lawyers have provided proper legal advice. As long as the agreement includes stringent compliance with legislative requirements, then any risks of a successful challenge are minimised.

With over a thousand agreements finalised through our Legal Review Service, we are yet to see a successful challenge (touch wood).

When you consider that the chance of a first marriage failing is somewhere between 35 and 40 percent and second marriages tend to be higher still, we believe the risks of not having an agreement in place far outweigh the risks of a successful challenge.

What do you think?

Just about anyone can enter into a binding financial agreement as long as they normally reside in Australia.

It makes no difference if you are married or in a de facto relationship (whether heterosexual or same sex):  all are treated equally under the law, and the same rights will apply.  You can make a financial agreement if you are:

Marriage partners	De facto partners
Engaged to be married	Considering moving in together
Married	Living together
Separated (but still married)	Separated
Divorced

There are very few restrictions on who can enter into a financial agreement as long as they are able to meet the six principles of contract law.

Financial Agreements are legally binding if they comply with the requirements specified in the Family Law Act 1975 (cth):

• the Agreement must be signed;
• each party must receive legal advice from a solicitor before signing their Agreement;
• each party must be given a signed statement by the solicitor stating that they received their legal advice; and
• each party must give the other party a copy of their solicitor’s statement confirming they have received their legal advice.

Even in circumstances where the parties have not fully complied with the above formal requirements, the Court can still make an order declaring a financial agreement to be binding, if it is satisfied that it would be unjust and inequitable if it were not (section 90G of the Family Law Act).

De facto couples are treated no differently than married couples. Under the Family Law Act, both de facto and married couples have the same rights.

The Family Law Act covers married couples in every state of Australia, and covers de facto couples for every state except Western Australia. De facto couples in W.A. are covered by the Family Court Act.

A de facto relationship is defined in section 4AA of the Family Law Act.  It is a relationship that two people who are not married or related by family have as a couple, living together on a ‘genuine domestic basis’.  It can exist between two people of the opposite sex, or between two people of the same sex.  Your relationship is not a de facto relationship if you are legally married to each other, or if you are related by family.  All the circumstances of the relationship will determine whether a couple are in a de facto relationship.  These include:

• the nature and extent of the common residence;
• the ownership, use and acquisition of any property;
• whether a sexual relationship exists;
• the degree of financial dependence or interdependence and any arrangements for financial support of one and other;
• the duration of the relationship;
• the degree of mutual commitment to a shared life;
• whether the relationship has been registered, in a state or territory with laws for the registration of relationships;
• the care and support of children;
• the reputation and public aspects of the relationship.

It’s not unusual for de facto couples to get married after they’ve been living together for a while.  In this case, they want to know whether their cohabitation agreement will suffice, or if they will need to enter into another agreement (usually a pre nuptial or post nuptial agreement).

Essentially, a de facto agreement and a prenuptial or post nuptial agreement are not the same thing.  Even though de facto couples and married couples have essentially the same rights, the Family Law Act deals with married and de facto couples separately, under different sections of the Act.  This means that you cannot rely on a de facto agreement if you later marry.  You will come under Part VIIIA  for married couples (rather than Part VIIIAB for de facto couples).

You do, however, have the option to enter into a new agreement that will cover the marriage relationship.  This also gives a couple the opportunity to review any prior de facto agreement, particularly in light of changes (or anticipated changes) to the relationship, such as the  arrival of children and the resulting change to the relationship dynamics.  In any event, it is recommended that you review your financial agreement regularly, regardless of a change in status of the relationship.

When considering whether to make a de facto or marriage financial agreement, there are a two important factors to consider.  The first is that a cohabitation or de facto agreement deals with what should happen if the de facto relationship breaks down.  If the couple marries, the de facto relationship has not broken down, making the de facto agreement void.  It simply ceases to be applicable.

The second factor is a reversal of the first, in that a pre nup agreement (being a pre marriage agreement made under the marriage provisions of the Act), will offer no protection if you are currently in a de facto relationship and you separate before the marriage actually takes place.  That is, if you’re planning on getting married, and are currently living together in a de facto relationship, you need to be aware that a pre nup agreement (pre marriage agreement) will only come into effect once the marriage takes place.  So making a pre nup with the intention that it will also protect you during the course of your de facto relationship prior to the wedding, is not accurate.

If your relationship has ended, and you and your partner both agree on how financial issues should be dealt with, then either a financial agreement or consent orders may be used to formalise your agreement.

The main difference between the two options is that consent orders need the approval of the Court whereas financial agreements do not require any external approval. You can make your own private Agreement, as long as you both agree and it will be binding as long as you follow the requirements for obtaining the mandatory legal advice.

Putting a financial agreement in place is also less expensive especially if you use our tried and true system.

The ideal way to restrict or waive child support is by entering into a Child Support Agreement, made under the Child Support Assessment Act.

You could also use the Child Support Agreement if you have agreed with your ex-partner to increase child support or vary it in any way from the official Child Support Assessment.  You can request an Assessment of Child Support from the Child Support Office of the Department of Human Services.

De facto couples are treated no differently than married couples. Under the Family Law Act, both de facto and married couples have the same rights.

The Family Law Act covers married couples in every state of Australia, and covers de facto couples for every state except Western Australia. De facto couples in W.A. are covered by the Family Court Act.

Should I get a Prenup? Before we proceed, I just want to make it clear that under Australian Family Law the correct name for a Prenup is a Financial Agreement. Financial agreements can be made before, during or after a relationship. –

At present if you want to protect, or shall we say quarantine certain assets from spousal claim, the only choice you may have is to get a prenup (financial Agreement).  They allow couples to decide how their assets will be handled at the beginning of the relationship, should the relationship break down at some time in the future.

In a Financial Agreement, both parties give up the rights they would otherwise have under the Family Law Act to apply to the Court for the division of the asset pool.  Instead, the couple make their own agreement about how assets will be dealt with up front, both during the course of the relationship, and in the event that the relationship comes to an end.

Whether a prenup is absolutely necessary would depend very much on your personal circumstances. If you need to protect assets then you may consider it necessary but if you don’t need to protect assets then you might not. Remember too that it’s not just about assets – you may want to quarantine debt. – Read more at:

The disadvantage of making a Binding Financial Agreement is that you give up the right to have a Court decide for you, about the matters you have dealt with in your Agreement. This means that the court cannot take into account matters which it otherwise would because you have decided to control your own affairs.

For example, lets say you have stated in your agreement that “each party will retain all their right title and interest to their superannuation entitlements and have no further claim on the entitlements of the other.” You can’t then change your mind and ask the court to make a decision about giving you a piece of the other persons Superannuation, without first attempting to have the agreement set aside.

De facto couples are treated no differently than married couples. Under the Family Law Act, both de facto and married couples have the same rights.

The Family Law Act covers married couples in every state of Australia, and covers de facto couples for every state except Western Australia. De facto couples in W.A. are covered by the Family Court Act.

Should I get a Prenup? Before we proceed, I just want to make it clear that under Australian Family Law the correct name for a Prenup is a Financial Agreement. Financial agreements can be made before, during or after a relationship. –

At present if you want to protect, or shall we say quarantine certain assets from spousal claim, the only choice you may have is to get a prenup (financial Agreement).  They allow couples to decide how their assets will be handled at the beginning of the relationship, should the relationship break down at some time in the future.

In a Financial Agreement, both parties give up the rights they would otherwise have under the Family Law Act to apply to the Court for the division of the asset pool.  Instead, the couple make their own agreement about how assets will be dealt with up front, both during the course of the relationship, and in the event that the relationship comes to an end.

Whether a prenup is absolutely necessary would depend very much on your personal circumstances. If you need to protect assets then you may consider it necessary but if you don’t need to protect assets then you might not. Remember too that it’s not just about assets – you may want to quarantine debt. – Read more at:

Yes, prenups are legal, although in Australia they are called “Financial Agreements” which are made before marriage.  The Family Law Act 1975 (the Act)  gives couples the option to enter into a legally binding Agreement in relation to how assets are to be dealt with should the relationship break down and the marriage come to an end.

Section 90B of the Act deals with Financial Agreements made between people who are contemplating entering into a marriage.

As long as the parties to the agreement comply with Section 90G of the Act, the financial agreement will be binding on the parties.

If your relationship has ended, and you and your partner both agree on how financial issues should be dealt with, then either a financial agreement or consent orders may be used to formalise your agreement.

The main difference between the two options is that consent orders need the approval of the Court whereas financial agreements do not require any external approval. You can make your own private Agreement, as long as you both agree and it will be binding as long as you follow the requirements for obtaining the mandatory legal advice.

Putting a financial agreement in place is also less expensive especially if you use our tried and true system.

The ideal way to restrict or waive child support is by entering into a Child Support Agreement, made under the Child Support Assessment Act.

You could also use the Child Support Agreement if you have agreed with your ex-partner to increase child support or vary it in any way from the official Child Support Assessment.  You can request an Assessment of Child Support from the Child Support Office of the Department of Human Services.

We recommend you first speak to the Child Support Assessment Office, which is part of the Governments’ Human Services Department, and request a child support assessment.  This will tell you how much child support you are legally entitled to receive from your partner, or how much child support you will need to pay your partner.

If you both agree, you can vary this amount, by either increasing or decreasing it.  You can do this by either:-

• a private arrangement, agreed between yourselves.  For example, your ex-partner can agree to pay an extra $100 to your account each week, above and beyond his or her payment obligation under the Assessment Notice.  Note, however, that your partner will not be legally bound to pay the extra amount, only the assessment amount;
• alternatively, you could enter into a binding child support agreement.  This makes any changes to the assessment amount legally binding.  You can find out more about child support agreements here.

You may also choose to enter into a written, informal agreement documenting your agreement on details relating to the care and well being of the children.  This may include specifying swap over days and the times which children spend with each parent, schooling arrangements, contact with relatives, and other issues.  An ideal way to record your understanding on these issues and help ensure both parents are operating from the same page, is to make a parenting plan.  For more about parenting plan, click here.

Stamp duty and capital gains tax liabilities may come into play when property is transferred from one partner to another, such as the matrimonial home or investment property, during a property settlement.  However, if the couple have entered into a binding financial agreement that deals with the property transfers before the date of the transfer, the parties will be exempt from paying stamp duty and capital gains tax.

The stamp duty exemption and CGT concessions are made available under state and territory legislation if the transfer is made under a financial agreement, irrespective of whether the parties are married or in a de facto relationship.  The exemptions on stamp duty and CGT under financial agreements are only applicable if the transfer of property, whether it is real property or a motor vehicle, is specifically referred to in the agreement.

To enable the exemption to be processed, the Office of State Revenue must sight a copy of the financial agreement at the date of assessment.