For any individual looking to avoid a costly divorce financial settlement having a financial agreement - also known as a binding financial agreement (or "pre-nuptial agreement") - in place can be a valuable step to take. This legally binding document allows individuals to draft a plan for distribution of their assets in the event the relationship ends.
To help individuals that are considering implementing one of these agreements, here are three things you need to know about:
1) Who can enter into a financial agreement?
Many individuals will enter into one of these agreements before they are married, so that their assets will be divided according to this arrangement once the relationship ends. As well as married couples, individuals in a de facto relationship can also enter into a financial agreement, known as a Domestic Relationship Agreement in NSW.
Couples who are already married can also create an arrangement that will govern how their assets are distributed in the event that they separate, while an agreement can also be reached after a relationship has ended.
2) What can be included in a financial agreement?
There are two main areas which can be covered by this arrangement - property settlements and spousal maintenance. Both of these areas can be included in an agreement, so that any jointly held assets are distributed according to a preset formula.
A financial agreement can also contain a number of different distributions, depending on changes to the circumstances of a couple. For example, if a couple expects to have children, a financial agreement can contain provisions for a different split should one parent also take on the role of primary caregiver.
3) Can a financial agreement be nullified?
While a financial agreement is a legally binding document, there will still be times when this can be set aside by the courts. For example, if the agreement contains an unfair distribution of assets, this can be overturned by the courts. The same situation can occur if there is insufficient provision for the future care of any children.
The Family Law Act 1975 (NSW) also lays out specific criteria that a financial agreement must comply with in order to be considered legally binding. If these conditions haven't been met, the arrangement is unlikely to be enforceable.
If you are considering drafting a financial agreement with your partner, you are legally required to seek the advice of a family lawyer. Having appropriate legal counsel can also ensure you have the right advice during this important process.