Parties can enter a financial agreement:
- before marriage (commonly referred to as a prenuptial agreement),
- during the course of marriage, or
- after divorce.
In de facto relationships, financial agreements can be entered into:
- prior to cohabitation,
- during cohabitation, or
- after separation.
Financial agreements in marriage and de facto cases entered into prior to the relationship, or during the relationship but before separation, are somewhat speculative in their nature. These types of financial agreements make provision for the financial settlement each party is to receive if they separate.
When entering into financial agreements lawyers are required to give advice to the parties on:
- the effect of the agreement,
- the parties’ rights and
- the advantages and disadvantages of the agreement.
A financial agreement will generally take away the right of a party to apply to the Court for a financial settlement.
Advising on the advantages or disadvantages of the agreement when it is entered into either before the relationship commences or prior to separation is difficult. The advice should cover how a financial settlement would be achieved upon separation in the absence of a financial agreement – whether a party will be better or worse off because of the agreement.
Many people value the peace of mind provided by a financial agreement prior to or during a relationship - this way they have some certainty about what will happen if the relationship ends.
Many people enter into a financial agreement prior to marriage or entering into a de fact relationship in order to protect their assets. This commonly occurs in cases where people are entering into subsequent marriages or relationships.
Financial agreements entered into before a marriage or de facto relationship or prior to separation can make whatever provision the parties want. However, drafting such agreements is not a simple matter of filling in a form. In order to adequately make provision for what the parties want, and in order to make a future challenge unlikely to succeed, the parties ought to make a full and frank disclosure of their financial circumstances before entering into the financial agreement, and the agreement needs to be drafted with care.
When the parties are negotiating a financial settlement after separation in the absence of a prior financial agreement, a financial agreement is often used to formalise the final financial settlement that has been agreed upon. Financial agreements entered into after separation can include provision that neither party will seek spousal support or de facto maintenance from one another - something which is not available if Court orders by consent are obtained. In order for the “no spouse maintenance/de facto maintenance” clauses to be effective, neither party must be incapable of supporting themselves without an income tested pension or allowance, having regard to the provisions of the agreement.
Whatever type of financial agreement is entered into, there are a number of technical requirements that must be fulfilled, including that each party obtain independent legal advice. A Party should not enter into a financial agreement without the advice of an experienced Family Lawyer.
For assistance with Family Law matters, phone Dominic Wilson, Managing Partner of Craddock Murray Neumann, on (02) 82684000. Our senior Family Lawyer is certified by the Law Society of New South Wales as an Accredited Specialist in Family Law.
Craddock Murray Neumann Lawyers on (02) 8268 4000 for friendly professional service.