Summary of Episode 1: Binding Financial Agreements/Prenuptial Agreements
Welcome to our Family Law Q&A series with Natalie Fielding, Accredited Family Law Specialist at Lewis Holdway Lawyers.
What is a pre-nuptial agreement and do we have these in Australia?
Yes. It’s called a Binding Financial Agreement. They act as an agreement for what will happen in the event that a couple separates.
They can be entered into at any stage of a relationship, whether that’s before, during or at the end of the relationship.
Can Binding Financial Agreements be drawn up for different types of relationships, for example same-sex or de facto? What about people that are already married?
Yes. They’re referred to in a different section of the Family Law Act but they’re still the same type of agreements and have the same effect. You can actually draft a Binding Financial Agreement for a de facto relationship that can be used if you decide to get married down the track, as well.
How do you decide if you need one? Essentially, for whom are Binding Financial Agreements a good idea and why?
Binding Financial Agreements are great for people who want to protect the assets that they brought into their relationship, or future money that they might receive. This could be money from a business interest or investment that they have, or from an inheritance they might get.
- Second marriages: We find that they’re particularly popular with people who are into their second or third relationships or marriages and they want to protect the assets that they’ve had in the past. Adult children often push for their parents to get a Binding Financial Agreement for a second relationship to protect their inheritance. Parents also may want to protect a future inheritance that they might give to their children, so they’re protecting family money from their in-laws.
- Estate Planning: Binding Financial Agreements are really good to use alongside your Estate planning. Remember that when you’re writing a Will, a Will is a wish - it’s not a legally binding document and so it can be overturned by a Court. A Binding Financial Agreement is, as the name says, a binding legal document. If you had a Binding Financial Agreement and a Will, your Binding Financial Agreement could set out what happens in the event of separation and/or death. There are clauses in our Binding Financial Agreements that we draft that state that they are binding on future heirs of your Estate so, you could use your Will alongside what your Binding Financial Agreement says.
What’s the process for putting a Binding Financial Agreement in place?
- Make an appointment with a Lawyer and discuss what you’re hoping to achieve, talk about what your current assets and liabilities are, and your future plan for your investments or what you want to do with your money.
- We will write a proposal to your spouse or partner, or future spouse or partner, and this should encourage discussion between you. We encourage people that they need to discuss this away from lawyers. Lawyers can be really expensive to use so the more discussion that you have away from your lawyers, the better it will be for you.
- Getting agreement from your partner/spouse: There’s no magic formula in selling a Binding Financial Agreement to your partner or spouse. We are often asked ‘How do I convince my partner to sign one?’. What we suggest you do is talk about why you might want to protect your assets and how that might achieve security for both of your futures. It also enables you both to work out what are you going to do with your future money and how are you going to manage your relationship going forward.
- Once an agreement is reached between the two of you, we would draft an agreement and there may be some negotiations with the terms of settlement and finalizing the documents.
- Once this is satisfied, we would get you to sign the agreement. We would sign what’s called a Solicitor’s Certificate, which is attached to the agreement, which is a statement to say that you have been provided with legal advice.
- Your partner or spouse would then need to go and see an independent Lawyer (so that means a lawyer from another firm) and they would need to get their own advice. Their lawyer would also have to sign a certificate stating they’ve given them the advice.
Is drawing up a Binding Financial Agreement a costly legal process?
It can be at times, depending upon the negotiations that take place between the parties. Sometimes, where there are a lot of assets involved or complicated structures, they can become more expensive, however you need to consider this is like an insurance policy. They cost a fraction of what it could cost in the event that someone separates and they enter into a costly dispute in the Family Court. It gives people some security for the future provided that it is drafted correctly. It's really important to get right because a drafting error can cause the agreement to be set aside.
You know the saying that says ‘you get what you pay for’?
If you buy an agreement off the Internet, you’re going to get what you pay for - it is probably going to be cheaper but the chances of it being set aside are really high. Whereas if you have a Lawyer draft the agreement for you, your chances of it being set aside decrease dramatically. This is because they make sure that they’re drafting the agreement in accordance with the current law. We can help you do that.
Any advice given in this Q&A series is of a general nature only and is not intended to represent or replace legal advice tailored to your personal circumstances.
If you want to seek advice about your situation, call Lewis Holdway Lawyers on 03 9629 9629.