When you’re working with large, potentially life-changing documents, having an expert on your side to guide and advise you is a must. That’s why before you enter a financial agreement, you need to speak to a lawyer.
Understanding Financial Agreements
Unless you’ve entered one before, it’s unlikely you’ll be fully across what a financial agreement is, and how it can benefit you. While your lawyer can provide you with a more detailed and nuanced explanation that is relevant for your situation, this article can help you understand the basics.
What Is a Financial Agreement?
In essence, a financial agreement — also known as a binding financial agreement — is a written contract between two parties. It explains how financial resources will be divided between the parties if the relationship comes to an end. You can enter into this kind of agreement before, during or after a relationship — a marriage or de facto relationship — has ended.
Many people’s experience of a financial agreement may be hearing about ‘prenuptial agreements’. However, these are still known as financial agreements in Australian legislation and a financial agreement does not have to occur before marriage. As noted above, a financial agreement can be entered at any point in the relationship, including before and after the relationship.
It is important to understand that for a financial agreement to be legally binding, both parties must receive independent legal advice. This helps alleviate the likelihood of one party being unfairly disadvantaged by the agreement due to misunderstanding or not fully comprehending the agreement. Similarly, the agreement needs to meet the requirements set out in the Family Law Act 1975.
Additionally, as it is a legally binding contract that can be extremely detailed, it is best to be prepared for the process to take 4–8 weeks to complete. It’s not recommended to begin the process of drafting and finalising a the agreement right before any large or stressful events, like getting married or purchasing a home together. Allow yourself plenty of time to finalise the details of the agreement, so you are not disadvantaged or feel as if you are having to rush the process and are unable to fully consider the implications of the agreement.
If you wish to terminate the agreement, there are a number of options available to you. These include creating a new financial agreement that has a clause within it that specifically terminates the previous agreement, entering a termination agreement, or going to court to argue it be set aside if particular grounds are met. These grounds can include if the agreement is impractical to carry out or there have been significant changes to a party’s circumstances so that they will suffer hardship if the agreement is still treated as binding.
What Does a Basic Financial Agreement Include?
Your financial agreement doesn’t have to cover all aspects of your financial relationship. Additionally, your agreement may look very different from someone else’s. However, common points covered can include:
- What financial settlement may look like, including the distribution of property and superannuation.
- What financial support or maintenance from one party to another may look like.
- If and how money will be divided, including money in joint bank accounts and if this division will happen regularly.
- How money will be handled if there are changes in the working situation of either party, such as a party moving to part-time work or acting as a stay-at-home parent.
- How existing debt is handled.
- How the ownership of pets, including financial responsibility will be handled.
- How changes to the financial relationship, like the length of the relationship, a legal marriage or the birth of children, will affect any agreed-upon provisions.
Why Should I Get a Financial Agreement?
At its core, a financial agreement allows you to avoid court proceedings when dividing assets and liabilities at the end of the relationship, as well as deciding any ongoing financial maintenance. For many people, a financial agreement provides a sense of certainty or security that allows them to feel more comfortable in the relationship, even if they do not ever expect the relationship to end. This can alleviate arguments around finances and assets, allowing both parties to positively move forward together.
You may wish to enter a financial agreement with your partner to:
- Preserve ownership of existing property or inheritance (including anticipated inheritance).
- Protect yourself if you have greater wealth than your partner.
- Protect the interests of any children from former relationships.
So What’s a Financial Agreement Lawyer?
A financial agreement lawyer is a law professional who can provide you with further background on financial agreements, with particular relevance to your situation, and take you through the entire process. This ensures that the end financial agreement is legally binding and is not unfairly weighted for or against you.
But Is It Worth Getting a Financial Agreement Lawyer?
In Australia, you must receive independent legal advice before entering into a financial agreement. Therefore, you must talk with a financial agreement lawyer. However, there are many reasons why working with a lawyer while creating and finalising your financial agreement is important.
They Can Confirm If a Financial Agreement Is Right for You
Your lawyer will have a full understanding of the legislation concerning financial agreements, they can confirm if a financial agreement is the best option for you. If not, they may then be able to point you in the right direction for a better option. This can save you significant time and money, and help you achieve a better outcome for yourself.
They Can Assist With Full Financial Disclosure & Summary
As part of a financial agreement, both parties must fully disclose their finances. This allows for informed decisions when dividing assets. For many people, full disclosure of finances is often more than a few bank statements. There can be a lot of information to gather and understand. Having a lawyer assist you ensures that nothing is missed and they can help you summarise the information for disclosure to the other party and their lawyer.
Similarly, your lawyer can also verify your partner’s financial disclosure, and advise you on this as needed.
They Can Draft the Agreement
Financial agreements can be quite complex and lengthy. If you have never written one before, let alone entered one, it is quite possible you may not set yourself up in the best position. Similarly, there may be aspects of the agreement you do not fully comprehend. This can then lead to issues down the track and even potentially be grounds for terminating the agreement.
However, they can help you understand the agreement as it is drafted, including any advantages and disadvantages for you, and how you can potentially improve your position. For instance, it may be worth considering both parties’ occupations and future capacities to earn.
They Can Assist With Revisions, Negotiations & Finalisation of the Agreement
Once the agreement has been drafted, it must be shared between parties to allow for revisions. Amendments may be negotiated to allow for a more equitable agreement. Having an experienced lawyer assist with this can help you get a better deal. Additionally, your lawyer can confirm if the agreement is compliant with all requirements and then prepare it for finalisation, including signing.
They Can Witness & Confirm Mandatory Requirements Have Been Met
As it is such an important document, you will need to have a professional witness see you sign the financial agreement. Your lawyer, however, can act as this witness. Then, if the agreement is ever in doubt or challenged, they can confirm that you signed the contract and understood it.
Similarly, as noted above, it is mandatory that both parties receive separate independent advice for a financial agreement to be legal. As part of this, your lawyer can confirm that you have been advised throughout the process. They will do this by signing a lawyer certificate stating the fact. This is an important aspect of the agreement to ensure it is legally binding.
Find a Financial Agreement Lawyer Today
At Duffy & Simon, our experienced lawyers can assist you. With over 130 combined years of experience, we always advocate for our clients’ best interests while providing them with accurate, relevant and quality legal advice. We can guide you through the financial agreement process, providing clear and honest advice, to deliver you the best possible outcome talk to us today.