Binding Financial Agreements

It is possible for people to sign a legally binding agreement, before they marry or enter a de facto or domestic relationship, setting out how their property is to be divided if they later separate.

The value and benefit of a binding financial agreement cannot be underestimated. A fair, well thought out agreement can result in an orderly financial settlement, saving each spouse tens of thousands of dollars in legal costs and the enormous emotional cost of a legal dispute.

People in a de facto or domestic relationship (or about to enter one) can sign a Domestic Relationship Agreement under the New South Wales Property (Relationships) Act.

For those about to marry, already married or divorced the Commonwealth Family Law Act allows them to sign a Binding Financial Agreement. There are three types of Binding Financial Agreements:

  • Before marriage – “pre nuptial” agreements – where spouses wish to quarantine previously acquired assets from the consequences of separation, or where one spouse comes into a marriage already holding interests in family business structures and there is a desire to protect those business assets from involvement in a Court dispute. Most commonly used in second marriages.
  • During marriage – “mid nuptial” agreements – can be used in a number of circumstances.  It may be an agreement made when the parties are happily together and have the same effect as a pre-nuptial agreement, just made after marriage.  It may be used when a marriage is in difficulty and a re-arrangement of assets is made to provide security for one or more spouse, as an asset protection measure.  It could be an agreement about division of assets made after separation, but prior to divorce.
  • After divorce – “post nuptial” agreements – used as a means of securing a private settlement without any involvement of a Court or third parties.

The effect of both types of financial agreements is that provided the legal formalities are satisfied (basically, each spouse having independent legal advice), agreements are recognised as binding by the Courts – and it is generally not possible for a spouse to ask a Court to decide a property settlement. If there has been fraud, duress, misleading or unconscionable conduct then an agreement is unlikely to be recognised by the Courts.

Financial agreements between couples who are married, have been married to each other or are about to marry can also include superannuation agreements

Practice tip

  • If assisting in the negotiation of a Financial Agreement, ensure that your client makes a full financial disclosure.
  • Financial agreements can also involve third parties. This provides a useful opportunity to secure formal releases or indemnities involving related companies, trusts or family members who have a financial involvement with the separating spouses.
  • Be aware of the opportunities for asset protection in a financial agreement.
  • Don’t mix Child Support agreements with financial agreements.

If you have any questions in relation to this article, please feel free to contact our office.


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