Everything you Need to Know About Financial Agreements in Relationships

Navigating the complexities of relationships can be challenging, especially when it comes to financial matters. Whether you are entering a new relationship or looking to safeguard your assets after a separation, understanding the intricacies of financial agreements is crucial. This comprehensive guide will walk you through the essentials of financial agreements and how they can protect your financial interests.

What Are Financial Agreements?

Financial agreements, often referred to as prenuptial agreements (prenups), postnuptial agreements (postnups), or binding financial agreements (BFAs), are legal contracts between couples that outline the division of property and financial resources. These agreements can be entered into before, during, or after a marriage or de facto relationship.

Key Components of Financial Agreements

A financial agreement typically covers how property and financial resources will be dealt with upon the dissolution of a relationship.

This includes: 

•       Division of Property  : How assets and liabilities will be distributed.
•       Spousal Maintenance  : Provisions for the financial support of a partner during or after the relationship.

Superannuation Interests  : How superannuation will be split, which can be specified as a percentage or a fixed amount.

The Process of Creating a Financial Agreement

Creating a financial agreement involves both parties obtaining independent legal advice and fully disclosing their finances, resulting in a written contract that adheres to legal standards, ensuring its enforceability.

•       Seek Legal Advice  : Both parties must receive independent legal advice to understand the agreement’s effects and requirements.
•       Full Disclosure  : There must be a complete disclosure of each party’s financial position, including assets and liabilities.
•       Written Agreement  : The agreement must be in writing and comply with the Family Law Act’s provisions.

Independent Legal Advice  : Each party must have a signed statement from their lawyer confirming that legal advice was provided.

Benefits of Having a Binding Financial Agreement

A binding financial agreement offers clarity on asset division and financial support if a relationship ends, ensuring asset protection and potentially easing tax burdens, which leads to a more straightforward and efficient settlement process.

•       Peace of Mind  : Clarity on the outcome if the relationship ends.
•       Asset Protection  : Safeguards individual wealth and assets accumulated before the relationship.
•       Tax Benefits  : Potential relief from stamp duty and Capital Gains Tax on transactions.

Efficient Settlement  : Post-separation negotiations can be more straightforward with an agreement in place.

Inclusion of Superannuation and Spousal Maintenance

Financial agreements can include superannuation and spousal maintenance. However, for spousal maintenance to be enforceable, the agreement must specify the party’s name and the amount or property proportion.

Child Support and Financial Agreements

While financial agreements can address child support, it is advisable to handle this through a Binding Child Support Agreement to keep it separate from other settlements.

Challenges to Enforceability

A financial agreement’s enforceability can be challenged if it was formed under duress or fraud, becomes impractical due to significant changes in circumstances, or if it results in unconscionable conduct that severely disadvantages one party.

•       Fraud or Duress  : If entered into under fraudulent circumstances or duress.
•       Unfair Circumstances  : If it becomes impractical due to changes in circumstances, especially concerning children.

Unconscionable Conduct  : If a party has been unjustly disadvantaged.

What Happens if a Partner Passes Away?

Financial agreements continue to be valid even after the death of a partner, binding the deceased’s estate. However, the court may consider the agreement when resolving family provision claims on the estate.

Terminating a Financial Agreement

Parties can mutually agree to terminate a financial agreement by entering into a subsequent agreement. The court will then assess whether the termination is just and equitable.

In the landscape of family law, financial agreements stand as a pivotal element for couples to manage their financial matters with foresight and clarity. These agreements not only pave the way for a structured approach to asset division but also offer a sense of security and assurance. It’s important to navigate these agreements with the expertise of seasoned professionals. Mendis & Gibson Lawyers are well-equipped to provide comprehensive support in all family law matters. With our guidance, you can tailor a financial agreement that aligns with your unique circumstances and legal requirements. To explore your options and understand the nuances of financial agreements, we invite you to schedule a free consultation, ensuring you make informed decisions for your future.