The Ins and Outs of a Financial Agreement
What is a financial agreement?
A financial agreement is a contract between two parties about how the property, financial resources, and superannuation should be shared out between the parties after the relationship has ended. A financial agreement is also commonly known as a binding financial agreement.
A financial agreement can also deal with spousal maintenance and maintenance for a child for both married parties or de facto parties where separation occurs.
There are three general types of financial agreements, which are:
- A financial agreement made after parties to a relationship have separated.
- A financial agreement made during a marriage or de facto relationship which is also known as a cohabitation agreement.
- A financial agreement made before you enter into a marriage or de facto relationship, which is also known as a pre-nuptial agreement.
Financial agreements are available to married couples and de facto couples including same-sex couples. While there are different sections of the Family Law Act that apply to financial agreements for marriages or de facto relationships, the end result is often the same.
The major advantage of a financial agreement is that the parties largely control the settlement of their affairs after separation. This is more cost-effective than going to court, and financial agreements are almost always less stressful than court proceedings.
Is a Financial Agreement Right for You?
A financial agreement is made by agreement between the parties of the relationship, as to how the property, financial resources, and superannuation between them are to be shared out.
A financial agreement may also be used where appropriate for:
- Spousal maintenance where one party provides support to the other party usually through regular monetary payments or a lump-sum payment or a set off in the sharing out of the property.
- Child maintenance where one party agrees to provide support to the other party or to a third party, for a child of the relationship. Please note, child maintenance under a financial agreement is not child support. Maintenance for a child under a financial agreement should not be confused with child support obligations under the Child Support (Assessment) Act which is a different set of obligations.
A financial agreement is only effective where you and the other party are willing and able to come to an agreement.
As property settlement deals with all of your property, financial resources, and superannuation, it is important to get it right. The outcome will have long and far-reaching effects.
Often, it will take some negotiation, usually in writing before parties come to an agreement. Some patience is required as property settlement is often complex. There are often factors, issues or events that each party wishes to bring to the other party’s attention for their consideration.
If a financial agreement is not right for you, then after you separate, you may need to consider court proceedings to resolve how the property should be shared out.
Do I Need a Lawyer for a Financial Agreement?
You will need a lawyer for a financial agreement and so will the other party. That means two lawyers are required, one for each party. This is because the Family Law Act says a financial agreement may not be binding unless each party’s lawyer has provided a written statement saying they have provided the party they act for with independent legal advice. The statement that independent legal advice has been provided should be annexed to the financial agreement.
As the written statement that independent legal advice has been provided can only be provided by a lawyer, it stands to reason that you must have a lawyer for a financial agreement.
A qualified lawyer would not provide a statement that they have provided independent legal advice unless they understand the circumstances of the relationship, the contributions made by the parties and the future needs of the parties.
This is because the contributions and future needs of each party will have an effect on what would be fair in sharing out the property, financial resources and superannuation between the parties and whether or not spousal maintenance and maintenance for a child should be included. A lawyer will consider this and should address these factors in their legal advice to you.
If a written statement that independent legal advice has been given by a party’s lawyer to that party is not provided to the other party’s lawyer or annexed to the financial agreement, then the financial agreement may not be binding or enforceable.
What property is included in a financial agreement?
Almost any property of value can be included in a financial agreement. This can include land, houses, investment properties, money, cars, boats, trailers, tools and equipment, business interests, business goodwill, furniture, shares, other financial securities, long service leave entitlements, annual leave entitlements, superannuation, some insurance policies, inheritance, some compensation claims, entitlements under a trust or property held for a party by someone else such as a family member or acquittance.
Can property I had before the relationship began, be included in the property settlement?
Property brought into the relationship by one party can be included in the property settlement, however, complex legal principles exist to determine how much, if any, of the property should be considered.
How much of the property to be dealt with depends on the length of the relationship, the contributions by the parties to the relationship and any future need factors.
Do I have to do a financial agreement?
No, you do not have to do a financial agreement, however, there may be bad consequences if you do not. Without a financial agreement, application for consent orders or court orders, there will be no legal certainty to the sharing out of your property.
This means that the other party can pursue a legal property settlement against you in the future even if you have already agreed and shared out the property between you informally. This will still be the case even if you both made an informal agreement in writing and signed it. An informal property settlement provides no legal protection in most cases.
A financial agreement can be used to provide legal certainty to an informal property settlement that has already been completed.
Does my bank or mortgage provider require a financial agreement to be completed?
Often where you separate and there is real estate involved that has a mortgage and you or the other party wish to refinance that property, the bank providing the existing mortgage or new mortgage, may require that a formal legal property settlement be completed.
Almost all banks that require a formal property settlement will accept a financial agreement. To be certain, you should speak to your mortgage provider, so you understand their requirements.
Can a financial agreement include parenting matters?
A financial agreement cannot be used to resolve parenting matters. A financial agreement should only be used for property settlement.
A financial agreement will usually contain some details about any children such as whom the children will live with, what spend-time arrangements are in place between the parents and whether there are any special issues or health issues.
Child arrangements in a financial agreement are not enforceable. A private agreement as to parenting arrangements can be made informally or if you prefer them to be made informally but in writing, then through a parenting plan.
If you would prefer to resolve property settlement and parenting matters together after you have separated, you can use an Application for Consent Orders for both property settlement and parenting matters.
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