What are they?
A financial agreement is a written agreement between two or more people that complies with Part VIII or VIIIAB of the Family Law Act 1975 (Cth).
Many people refer to financial agreements as “pre-nups” or “pre-nuptial agreements”. Whilst financial agreements are similar to pre-nuptial agreements the main difference is that they can be entered into before, during, or after a marriage or de facto relationship.
What do Financial Agreements cover?
Under Section 90D of the Family Law Act, financial agreements cover the following:
- division of property, finances and debts after a marriage breakdown or final separation
- spousal maintenance
- other incidental issues.
There are certain requirements that must be met for financial agreements to be legally binding. It is required for both parties to sign the agreement and to receive independent legal advice.
It is also prudent for parties to provide full frank and proper financial disclosure (see heading, “When can a Financial Agreement be set aside?”).
The different types of financial agreements are:
- In contemplation of a marriage (s90B);
- In contemplation of a de facto relationship (s90UB);
- During a marriage (s90C);
- During a de facto relationship (s90UC);
- After divorce (s90D); or
- After a breakdown of a de facto relationship (s90UD).
A financial agreement outlines the parties’ agreement as to their financial arrangements. If done correctly, financial agreements are powerful documents and should be considered carefully by a competent solicitor.
Financial Agreements are intended to avoid the need for the parties to go to court in respect of property matters. They also provide parties with an understanding as to how their assets will be divided in the event of separation or divorce.
Will the death of a party terminate the Financial Agreement?
Under s90H and s90UK, a financial agreement that is binding on the parties to the agreement continues to operate despite the death of a party to the agreement and operates in favour of, and is binding on, the legal personal representative of that party. This has the effect of binding the estate of the deceased party, regardless of whether this is stated in the financial agreement.
In NSW, it is possible to include a deed of release in a financial agreement, under the Succession Act 2006 (NSW). By including such a release, the parties essentially give up their right to make a claim against the other’s estate if inadequate provision was made for them in the deceased person’s will.
Terminating a Financial Agreement
A financial agreement can be terminated in the following ways:
- by the parties signing a new financial agreement which includes a provision terminating the old agreement; or
- signing a written document specifically terminating the agreement (a termination agreement) pursuant to s90J or s90UL.
A termination agreement is only binding if it is signed by all parties and all parties have been provided with independent legal advice.
When can a Financial Agreement be set aside?
Under s90K or s90UM the Court can set aside a financial agreement for the following reasons:-
- Fraud. (Including failure to disclose a material matter) – s90K(1)(a) and s90UM(1)(a). This is the reason why it is prudent for parties to provide full, frank and proper disclosure.
- Creditor’s interests. If the financial agreement was intended to defraud or defeat a creditor or was entered into with reckless disregard of a creditor’s interests – s90K(1)(aa) and s90UM(1)(b)
- Void or unenforceable. If the financial agreement is void, voidable or unenforceable, due to mistake, misrepresentation, public policy, uncertainty, incompleteness, duress, undue influence, unconscionability, breach, waiver, estoppel – s90K(1)(b) and s90UM(1)(c)
- Impractical. If the financial agreement becomes impracticable due to a change in circumstances – s90K(1)(c) and s90UM(1)(f)
- Hardship. If there is a material change in circumstances in relation to a child, and the financial agreement would otherwise cause hardship – s90K(1)(d) and s90UM(1)(g)
- Unconscionable conduct when the financial agreement was entered – s90K(1)(e) and s90UM(1)(h). This point has been recently litigated in the High Court decision of Thorne v Kennedy  HCA 49. In this decision, the High Court, unanimously set aside the two financial agreements on the grounds of unconscionable conduct.
- Superannuation. No reasonable likelihood that a flag will be terminated – s90K(1)(f) and s90UM(1)(i)
- The financial agreement contains a superannuation interest that cannot be split – s90K(1)(g)and s90UM(1)(g)
- Other interests. To protect the interests of parties in other relationships with a party signing the financial agreement – s90K(1)(ab) and s90UM(1)(c) and (d)
Jennifer Weate & Associates have extensive experience in drafting, reviewing and advising on financial agreements. We are happy to assist with any enquiries you may have, including but not limited to:
- Drafting your financial agreement
- Negotiating your financial agreement
- Advising on a proposed financial agreement
- Reviewing a financial agreement and advising on prospects of success with regards to setting aside an existing financial agreement.