A prenuptial agreement made in Victoria is made under that Act rather than under Victorian law, so the requirements are the same whether the parties are in Melbourne, on the Mornington Peninsula or elsewhere in the state. Freeman Family Law has prepared and contested these agreements for Melbourne and Mornington Peninsula clients for more than thirty years, from the CBD office opposite the Family Court and from Mornington, Dromana and Sorrento.
The Family Law Act provides that married or de facto couples can decide how their assets should be divided by entering into a Binding Financial Agreement.
Certain formalities are required for such agreements to be binding, including each party obtaining separate legal advice. The Family Law Act applies to both married and de facto couples. Financial Agreements are usually entered into after a separation. However, they can also be entered into before or during a de facto relationship or marriage.
Often termed the ‘Australian Prenup’ in family law circles, such a Binding Financial Agreement is an agreement entered into by two parties who are either in or entering a de facto relationship or marriage which does the following:
- Sets the terms of an out-of-court settlement in the event of separation and/or divorce
- Sets out that both parties are contracting out of the rights they have to go to court under the Family Law Act
Such a Binding Financial Agreement can set out, with as much precision as possible, how the parties are to divide their assets in the event of a separation in the future. This can cover all assets and financial resources, including a business, real estate, bank accounts, superannuation, shares and any other item defined as property under the Family Law Act. It can also cover future spousal maintenance (either setting out the amount to be paid or setting out that no spousal maintenance is to be payable). Such an agreement can also quarantine future inheritances. The parties can also contract not to make a claim on the other’s estate in the event of death.
What counts as a de facto relationship?
A de facto relationship can be defined as follows: “when two people are not married but live together or have lived together as a couple on a genuine domestic basis.” The Family Law Act sets out a number of considerations that the Court must consider when determining whether there is a de facto relationship. Theoretically, a person can be in a marriage and a de facto relationship, and in two de facto relationships at once. That is the subject of another article. The same laws apply to same-sex couples as to different-sex couples.
When to consider a Binding Financial Agreement
No one finds themselves in a de facto relationship or enters into a marriage in the expectation that things end with separation and/or divorce. However, there are times where one or both parties in a relationship may wish to reach an understanding of what things would look like financially in the event that it does.
Freeman Family Law has extensive experience in working on Binding Financial Agreements. Typically these agreements are sought in (but are in no way limited to) the following scenarios:
- Second marriages
- When one or both parties already have children, where each party may naturally wish to preserve assets for their children
- When one party has a significant amount of assets acquired prior to the relationship
- Where one or both parties are likely to inherit
- Where one or both parties have an interest in a business and wish to ensure that the business is not disrupted
- Where one or both parties are involved in a family farm or business
- Where one or both parties have received funds from their parents by way of gift or loan and wish to preserve that
Of course, they can equally apply to first marriages or de facto relationships, regardless of the assets either party is bringing to the relationship. A good Binding Financial Agreement will also consider what might happen in the future.
What makes an agreement binding
A Binding Financial Agreement is not by itself a foolproof way of guaranteeing that assets will be split the way you want in the event of a breakdown of your relationship. These documents are complex and require a strong knowledge of the law.
For a Binding Financial Agreement to be binding, the following requirements must be met:
- The Binding Financial Agreement must satisfy all relevant requirements of a binding contract
- Each party must have independent and individual legal advice
- The formalities required by the Family Law Act 1975 are complied with by the parties in the agreement
How these agreements can be set aside
Section 90K and Section 90UM of the Family Law Act set out most of the factors the Court must consider when a Binding Financial Agreement is contested.The grounds for contesting an agreement include:
There has been fraud or misrepresentation. It is very important that before entering into such agreements, financial disclosure has been exchanged and valuations obtained and it is clear what each party’s assets and financial resources are worth. To withhold such information puts the agreement in jeopardy.
The agreement is vague or unclear. It is essential that the agreement is clear and consistent in its terms. An agreement that contains ‘sloppy’ drafting or is unclear or vague may be overturned wholly or in part by the Court.
The agreement was signed under duress or with the pressure of a deadline. Where an agreement is presented to the other party shortly before the wedding, for example, the agreement may be set aside. In some cases, it might be advantageous to wait until after the wedding to ensure that no party can argue that they signed under pressure.
The agreement does not comply with the formalities prescribed by the Family Law Act 1975. Care must be taken by the solicitor drafting the document to ensure this is done. Failure to do so may affect the enforceability of the agreement.
There is a material change in circumstances since the signing of the agreement relating to the care, welfare and development of a child. This is referred to in sub-section 90K(1)(d) for married couples and sub-section 90UM(1)(g) in the case of de facto couples. Recent cases in the Family Court have interpreted the very birth of a child as the possible material change for the purposes of that sub-section.
There are a number of other grounds on which an agreement may be contested. That is why it is crucial that both parties receive independent and individualised legal advice from a solicitor with expertise in this area of the law.
How to arrange a Binding Financial Agreement
Perhaps the most difficult part of entering a Binding Financial Agreement is finding a way to broach the subject with your partner. This can be a bit easier for parties entering a second or third marriage or de facto relationship.
The process typically involves the following:
- Firstly, discuss with your partner the general idea of how your assets are to be divided in the event of a separation.
- Each party should provide their solicitor with a list of assets and valuations if appropriate, and documents evidencing the same, such as bank statements, financial statements and any other documents evidencing your assets, liabilities and income.
- Discuss with your lawyer how the agreement should look, taking into account as many future contingencies as possible. There may be several drafts.
- Your lawyer exchanges the settled draft with the other lawyer. The lawyer giving advice to the other party may well seek clarification or changes.
- Each party should receive detailed legal advice and this should be by letter.
- Once the agreement is finalised, each solicitor signs the certificate stating they have provided the requisite advice, and the certificates and the signed agreements are exchanged.
This procedure can take at least a month and sometimes several months.
Agreements made after separation
This is often the quickest and least expensive way of finalising an agreed property division. The formalities required and the requirement for independent legal advice are the same for “prenuptial” or “pre-cohabitation” agreements as they are with agreements entered into after separation.
The post-separation agreements may well eventuate after considerable negotiations. Each solicitor will still have to carry out due diligence and financial documents will need to be exchanged, again to establish each party’s assets, liabilities and income.
What a Binding Financial Agreement costs
A Binding Financial Agreement entered into before or during a de facto relationship or marriage, that is a “prenuptial” or “pre-cohabitation” agreement, usually carries far more expense. Negotiations are sometimes longer. The agreements cannot cover every eventuality but should try and cover as many as possible. Each case is different. There are often necessarily many drafts and redrafts.
The solicitor drafting the documents, and the solicitor giving advice, undertake a substantial liability risk. In the event of a separation, the unhappy party may seek to set aside the agreement. Remember that the solicitor drafting the document is putting his house on the line to protect your house. The lawyer who drafts the agreement may well be embroiled in future proceedings and have to give evidence as to what advice was given at the time.
For all of these reasons, a properly drafted “pre-cohabitation” or “prenuptial” Binding Financial Agreement can be expensive. However, the expense incurred will inevitably be far less than the legal costs that might be incurred if there is a Court dispute in the future.
Frequently asked questions
What is a prenup called in Australia?
A Binding Financial Agreement. The Family Law Act does not use the word prenup, though the term is common in family law circles and describes the same document.
Is a prenuptial agreement different in Victoria?
The Family Law Act is Commonwealth legislation, so a Binding Financial Agreement made in Victoria is made under that Act. The formalities are the same across the state, including the requirement that each party receive independent legal advice.
Are prenups legally binding in Australia?
Yes, where the requirements are met. The agreement has to satisfy all the relevant requirements of a binding contract, each party has to receive independent and individual legal advice, and the formalities required by the Family Law Act 1975 have to be complied with.
Can you get a prenup in a de facto relationship?
Yes. The Family Law Act applies to both married and de facto couples, and the same laws apply to same-sex couples as to different-sex couples.
Can a prenuptial agreement be signed after marriage?
Yes. Financial Agreements can be entered into before or during a de facto relationship or marriage, and they are most commonly entered into after a separation.
What can a Binding Financial Agreement cover?
All assets and financial resources, including a business, real estate, bank accounts, superannuation, shares and any other item defined as property under the Family Law Act. It can also cover future spousal maintenance, quarantine future inheritances, and record that neither party will make a claim on the other’s estate in the event of death.
How long does a Binding Financial Agreement take?
At least a month, and sometimes several months.
Can a Binding Financial Agreement be overturned?
Yes, on several grounds, including fraud or misrepresentation, vague or unclear drafting, duress or the pressure of a deadline, a failure to comply with the Family Law Act formalities, and a material change in circumstances relating to the care, welfare and development of a child.
Speak to a Melbourne prenup lawyer
Freeman Family Law prepares and contests Binding Financial Agreements from the Melbourne CBD and from the Mornington Peninsula. To discuss a prenup, a pre-cohabitation agreement, or formalising a property settlement you have already agreed with your partner, call Graeme Freeman on 03 9326 4433.
