Binding Financial Agreement

There is a time and place for using a binding financial agreement
  • After many years this is still a risky area
  • We can advise you of the benefis and risks with using a binding financial agreement
  • Know about the advantages and disadvantages before you proceed

Formalising your Agreement

Once discussions and negotiations have resulted in an agreement, the parties’ next step is to decide how they wish to record their agreement.

Some options available to the parties include:

  • Have a private agreement which is not enforceable
  • Enter into a binding financial agreement. This is for property and financial matters
  • Obtain court orders by consent.

There is no legal requirement that separated parties must formalise their agreement in a particular manner. Many separated parties make arrangements between themselves.

There are many advantages in having an agreement formalised in writing and in a form that is enforceable. Some clear benefits include:

  • Being able to enforce an order if required
  • Having a court order or a binding financial agreement may allow a party to be exempt from transfer duty or obtain capital gains tax relief.

One significant advantage of having a formalised agreement is that the parties’ arrangements are finalised. This in turn allows the parties to plan their future with a higher degree of confidence and certainty.

Financial Agreement

A financial agreement is an agreement that is made under the Family Law Act and satisfies the requirements of the legislation.

A binding financial agreement can be made:

  • Before marriage or cohabitation
  • During marriage or cohabitation
  • After a divorce or separation

Binding financial agreements can deal with assets and financial resources acquired before the relationship, during the relationship or after separation.

Spousal Maintenance

One main advantage of a binding financial agreement is that it can be used to exclude spousal maintenance. This cannot be achieved by way of a court order by consent.

If spousal maintenance is a real issue when negotiating consent orders one option available to the parties is to exclude spousal maintenance by entering into a binding financial agreement in conjunction with the consent orders.

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Requirements

The Family Law Act sets out numerous formal requirements in order for a binding financial agreement to be valid and binding.

A binding financial agreement is a private agreement which does not go through the court system to be approved. This can be an advantage and a disadvantage. Each party must be represented by a solicitor who must provide a legal advice certificate.

Although there will be situations where a binding financial agreement would be beneficial, it is generally considered by family law practitioners that a binding financial agreement is not as final as having a court order.

Setting Aside a Financial Agreement

A court may make an order setting aside a financial agreement or a termination agreement if:

  • the agreement was obtained by fraud (including non-disclosure of a material matter)
  • A party to the agreement entered into the agreement;
    • For the purpose of defrauding or defeating a creditor or creditors of the party or
    • With reckless disregard of the interests of a creditor
  • A party to the agreement entered into the agreement:
    • For the purpose of defrauding another person who is a party to a de facto relationship with a spouse party
    • For the purpose of defeating the interests of that other person in relation to any possible or pending application
    • With reckless disregard of those interests of that other person
  • The agreement is void, voidable or unenforceable
  • In the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out
  • Since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child, a party to the agreement will suffer hardship if the court does not set the agreement aside
  • In respect of the making of a financial agreement – a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable.
  • The agreement covers at least one superannuation interest that is an unsplittable interest

Fixed fee for most binding financial agreements