We all work tirelessly to grow our wealth and ensure that we have the financial means to live a comfortable lifestyle and leave our legacy for our children. However, what happens when family dynamics change and the wealth you have grown is tied up in a family law dispute? The most effective way of ensuring your wealth is protected is to enter into a Financial Agreement before the breakdown of a relationship.
Planning for your future includes not only making the right investment decisions but also protecting those investments. A Financial Agreement can be considered as an insurance policy: you may never need to use it, but it’s there for piece of mind. People obtain life insurance, home and contents and various other insurances; an insurance policy for your future wealth is arguably no different.
You may have heard of Financial Agreements in the context of people getting married when referring to the American term of a “pre-nup”. What many people might not know is that these agreements can be entered into at all stages of a relationship, not only before, but during the relationship and after separation. This gives people the flexibility to manage their financial affairs based on their changing financial circumstances.
So what is a Financial Agreement?
A Financial Agreement empowers parties to reach agreements as to their property affairs without the involvement of the Family Law Courts.
We prepare Financial Agreements for a variety of clients to achieve many different outcomes such as:
- Quarantining assets that were brought into the relationship by one party so that if the relationship breaks down, the other party cannot make a claim against that asset.
- Quarantining future inheritances that may be received during the relationship.
- Future spousal maintenance that may or may not be paid in the event of a separation.
- Finalising property disputes that may require creative and unconventional outcomes that are unable to be made by way of Court orders.
As Financial Agreements in the pre-marital sense, can last for years if not decades, it is important that the terms of the Financial Agreement consider changes in circumstances such as the parties having children, employment, future inheritances and the potential future needs of both parties.
In order for the Financial Agreement to be Binding and enforceable, there are strict requirements that must be met which include:
- Both parties must obtain independent legal advice
- The agreement must be in writing; and
- The agreement must strictly comply with the Family Law Act 1975.
Traps with Financial Agreements
There have been many cases that have demonstrated the importance of having a Financial Agreement drafted carefully and with expert advice.
In one of the few Family Law matters that have been heard in the High Court of Australia, Thorne v Kennedy 2017 was a case that set aside two financial agreements entered into between the parties on the basis of unconscionability.
In this particular case, the Wife was aged 36 and the Husband 67. When they first met, the Wife was living overseas and spoke very little English. The Wife was shown a Financial Agreement 10 days prior to their wedding. The Husband made it clear that if she did not sign it, the wedding was off. The Wife had arranged family members to travel from overseas and had no other support or financial resources in Australia.
The Wife received independent legal advice not to sign the agreement and the lawyer was quoted as saying, “This is the worst agreement I have ever seen”. The Wife signed the Financial Agreement which required a further Agreement to be signed 30 days after the wedding, albeit in the same terms as the first Agreement.
The parties separated 4 years after the first Agreement was signed.
The High Court found that the Husband’s actions were unconscionable as the Wife was under duress to sign the Financial Agreement.
At Lewis Family Lawyers we spend the time with our clients to obtain all of the important information required to ensure any Financial Agreement we draft is binding and will not be set aside by a court. Taking the time early to meet with our client is the key to preparing a solid Financial Agreement.
