Financial Agreement

How to document a property settlement

If you and your partner reach an agreement about how the assets, liabilities and financial resources accrued during the relationship should be divided, the terms of the agreement reached can be made binding between the parties in one of the following ways:

1. By a Binding Financial Agreement (‘BFA’); or
2. By Consent Orders, which are made by the Court.

Binding Financial Agreements

The Family Law Act 1975 (Cth) allows parties to a marriage or de facto relationship to enter into a Binding Financial Agreement.

A Binding Financial Agreement (or BFA) is a private agreement entered into by parties to a relationship to settle their property affairs. A BFA is essentially a contract that allows parties to avoid going to court, and can dictate how their property is to be dealt with, as well as what maintenance might be payable by one party to another.

A BFA can be entered into before, during or after the breakdown of a relationship. This applies to both marriages, and de facto relationships, both of which fall within the ambit of the Family Law Act 1975 (Cth).

It is important to consider a binding financial agreement when:

1. you have more money, property or assets than your partner at the beginning of your relationship;
2. you may, at a later stage, be entitled to an inheritance or large gift;
3. you operate a family business or investment that you need to preserve;
4. you want to ensure the terms of any property division are agreed up front to avoid going to court later;
5. you are forming a new relationship and you have children who need to be protected financially.

But here is our warning. The relevant provision of the Act is s 90G which is titled “When financial agreements are binding”. Not may be binding. Not can be binding. When they ARE binding and that is because the legislation says

(1) Subject to subsection (1A), a financial agreement is binding on the parties to the agreement if, and only if:

(a) the agreement is signed by all parties; and

(b) before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement; and

(c) either before or after signing the agreement, each spouse party was provided with a signed statement by the legal practitioner stating that the advice referred to in paragraph (b) was provided to that party (whether or not the statement is annexed to the agreement); and

(ca) a copy of the statement referred to in paragraph (c) that was provided to a spouse party is given to the other spouse party or to a legal practitioner for the other spouse party; and

(d) the agreement has not been terminated and has not been set aside by a court.

That means that a lawyer must know everything about you and your financial position, your aspirations and goals. They must give you advice about the effect of the proposed agreement on your rights under the Act and about the advantages and disadvantages of you making that agreement at that point in time.

That is not a task that can be undertaken quickly or cheaply. If you want to make sure that the agreement is binding, enforceable and cannot be set aside, you MUST have done all of the things listed above. Not just some of them. All of them. You and your partner must both get that advice independently of each other, and it must not be undertaken quickly or cheaply. It must be done with all of the information in front of the family law solicitors or lawyer, and preferably in writing. If you don’t, be warned! Your agreement will not be worth the paper it is written on and everything that you both own will go into the matrimonial pool and may be divided up in ways that you never expected or wanted.

Consent Orders

An alternative to entering into a Financial Agreement, is to prepare a written agreement in the form of a Consent Order which is filed with the Court for approval. When you sign the agreement you both state that you agree to the terms provided in the document, and that you are of the opinion that the outcome is just and equitable and if the Court agrees with you, the Court will approve the Order and it is given legal effect.

When Consent Orders are filed with the Court, you do not have to attend Court unless there are questions that the Court would like to ask before it is satisfied that the outcome is just and equitable. If that arises, however, the evidence can usually be provided to the Court by way of an Affidavit.

Court Order Property Settlement

If parties cannot reach an agreement outside Court, they can ask the Court to make an order on their behalf. The Court will only make an order if it is fair and reasonable to alter the parties’ property interests and in making that decision, the Court will first have regard to whether it is just and equitable for the Court to alter the parties’ property interests.

If the Court is satisfied that it is just and equitable in the circumstances of the relationship to make a property settlement, the Court then follows the four step process.

What are the Time Limits

A married couple has 12 months from the time the divorce is finalised to ask the Court to make orders relating to property settlement. The Court may grant an extension of time in exceptional circumstances. Read the article here.

A de facto couple has 2 years from the date of separation to make a property settlement. The law in both de facto and marriage relationships is the same, although different sections of the Family Law Act apply.

It is important that you do not miss these time limits. If we can assist you, please reach out to us here.

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