Binding Financial Agreement (Before Marriage)

This financial agreement is to be used by parties who are contemplating marriage and wish to enter into a written agreement as to:

• how, in the event of the breakdown of the marriage, their property and financial resources are to be dealt with; or
• the maintenance of either of the parties during the marriage or after divorce.

This financial agreement has no force or effect if the parties do not subsequently marry. Therefore, you should consider an alternative agreement. For de facto couples in all states and territories except Western Australia the relevant provisions are section 90UB or 90UC of the Family Law Act 1975 (Cth) (FLA). For de facto couples in Western Australia, refer to part 5A division 3 of the Family Court Act and specifically to the relevant provisions are section 205ZN or 205ZO of the Family Court Act 1997 (WA) (Family Court Act).

There is no strict legal requirement for the agreement to be witnessed but this is highly recommended.

Independent legal advice

Section 90G(1)(b) of the FLA requires the parties to obtain independent legal advice regarding this agreement before signing, in order for this agreement to be valid. The agreement includes this requirement, and in its schedules includes forms for the legal practitioners to certify that they have provided advice and for both parties to acknowledge this. Legal practitioners may provide different forms.
Effectively then, this template allows the parties to provide the initial terms but these will remain subject to change depending on the legal advice they are separately provided.

Tailoring your agreement

When preparing a financial agreement, you should consider the following issues:

• your assets and financial resources;
• the contributions of the parties to the assets and financial resources;
• the needs of both parties;
• whether one party is under a special disadvantage, duress or weakness;
• needs for the birth of a child or children;
• needs in the event of separation or divorce;
• unforeseen events such as serious illness, injury or unemployment;
• the definition of separation and the period the parties have to be separated before the agreement takes effect;
• whether reconciliation of the relationship is to be considered;
• the effect of death on the agreement. Section 90H of the FLA provides that a financial agreement continues to operate despite the death of a party to the agreement. However, a party may later wish to make a will that is inconsistent with the terms of the financial agreement and make provision in a will for a relative or children of a prior or later relationship. The agreement may include provision for each party to take out life insurance;
• the event of bankruptcy or other loss of the assets that the agreement relates to. In the case of bankruptcy, the assets of the bankrupt party may vest in the trustee in bankruptcy;
• the assets the subject of the agreement significantly increase or decrease;
• future assets may be joint assets or owned by one of the parties to the exclusion of the other;
• the sole property of one party may be intermingled with joint assets; and
• whether the agreement should deal with superannuation.

Advantages

Note the following advantages of financial agreements:

• efficiency: a financial agreement can often be simpler, speedier and less costly than either consent orders or consent orders as well as a separate child support agreement or superannuation agreement. This can occur, for example, where the matter is resolved before proceedings are commenced such as in the course of pre-action procedures;
• avoiding court: there is no requirement for judicial approval or attendance at a court or commencement of proceedings;
• no fairness requirements: there is no requirement that the terms of a financial agreement must be just and equitable, proper or reasonable. The financial agreement is binding and enforceable provided that the requirements of part VIIIA of the FLA in properly complied with. That part relates to the terms of documentation, execution and certification;
• privacy: there is no public record of a financial agreement. One or both parties may have very good reasons not to have their divorce settlement known to anyone other than their lawyers. In such cases, confidentiality clauses can be included in the agreement.

Disadvantages

Note the following potential disadvantages of financial agreements:

• potential for unfairness to one of the parties;
• uncertainty: as there is no requirement for the agreement to be approved by a court before being implemented, one party may later commence proceedings for spousal maintenance or property settlement. They may allege that the agreement is in some way defective or should be set aside;
• broader grounds for setting aside: there is some concern that the grounds for setting aside a financial agreement are broader than the grounds for setting aside financial orders. See sections 79A and 90K(1) (parties to a marriage) of the FLA or sections 90SN and 90UM(1) (de facto parties) of the FLA;
• responsibility for documents: there is no register of financial agreements so after execution the documents are retained by the parties. Documents can be lost, making the parties potentially unable to prove the terms of the agreement in the future and
• •difficulty of enforcement: operative clauses in a financial agreement may be more difficult to enforce than court orders.