More and more people are resorting to these agreements as part of effective estate planning. Not only do they give the parties to a stable marriage security during the course of the marriage in respect of the holding of separate assets etc, but if properly executed they also give some security as to what will happen to the investments or separate assets on dissolution of the marriage through divorce or otherwise. It also gives the parents of the contracting parties some security in knowing that their estate will devolve upon a particular child to the exclusion of that child’s spouse.
These agreements also allow spouses to treat each other as commercial partners by entering into joint-venture and other arrangements (for example the development and holding of property) without having the overwhelming influence of the matrimonial court hanging like the proverbial sword of Damocles, over their heads.
These agreements are particularly important as part of the estate planning when there are blended families or when one spouse has died and the other spouse remarries etc. They allow for the maintenance of separate assets for the benefit of the children years beyond death and or dissolution. They are a vital tool in asset protection and estate planning.
To assist you in considering a financial agreement, we advise as follows
How do Financial Agreements operate?
As you may be aware, amendments to the Family Law Act (1975) (“the Act”) which came into effect on 27 December 2000, enable a person to enter into a binding pre-nuptial Agreement relating to their financial affairs. The Act refers to these as Financial Agreements. Such an Agreement may relate to how, in the event of a breakdown of a marriage, all or any of the property or financial resources of either or both of the parties to the marriage are to be dealt with and may also relate to the maintenance of either of the parties to the marriage.
Provided certain criteria are met, the Agreement will be binding and as a result, if the marriage to which it relates breaks down, Part VIII of the Act which enables a court to make orders altering the property interests of the parties to a marriage and requiring one or both of the parties to make settlements of property and to transfer property, to the other, as the court determines, will have no effect.
When is a Financial Agreement binding?
A Financial Agreement will only be binding if:
- It is in writing and signed by both of the parties to it; and
- It contains a statement in it relating to each of the parties to it to the effect that that party was provided with independent legal advice from a legal practitioner with regard to the following matters before signing the Agreement:-
- The effect of the Agreement on his or her rights respectively;
- Whether or not, at the time when the advice was provided, it was to his or her respective advantage, financially or otherwise, to enter into the Agreement;
- Whether or not, at that time, it was prudent for him or her respectively to enter into the Agreement;
- Whether or not, at that time and in the light of such circumstances as were, at that time, reasonably foreseeable, the provisions of the Agreement were fair and reasonable;
- A certificate signed by the legal practitioner providing the legal advice is annexed to the Agreement;
- The Agreement has not been terminated or set aside;
- After the Agreement is signed the original is given to one party and a copy is given to the other.
How may a Financial Agreement be terminated?
A Financial Agreement may only be set aside if the parties to it enter into another written Agreement and in relation to that Agreement each of the criteria set out in the Paragraph 2 above is met. A commercial lawyer can help you navigate these things to understand this agreement more.
Please do not hesitate to contact Brett Samuel if you need any more information on 8320 2957.
