Family Law: The hidden traps of Binding Financial Agreements

A binding financial agreement is a contract between two people in a marriage or de facto relationship (or intending to be in such a relationship) which sets out how property, financial resources and spousal maintenance will be dealt with in the event of a relationship breakdown. Due to the plethora of US legal dramas which grace our screens, you might better know this document as a pre-nuptial agreement or pre-nup. For many people with significant asset pools, this may seem like the perfect solution to the inherent risk attached to combining your life, financial and otherwise, with another person. As such, it may come as a surprise to you that we do not do binding financial agreements at Frank Legal. Why? Because the law on binding financial agreements is not as clear cut as it may seem.

The problems with Binding Financial Agreements

In short, the problem is simply that binding financial agreements in the context of family law are a relatively new legal development in Australia. Prior to 2000, binding financial agreements were illegal. In 2000, new laws were created which legalised binding financial agreements.

Since coming into effect, binding financial agreements have been the subject of ongoing and often contradictory interpretation by the courts. This means that you cannot be entirely certain of your position when entering into a binding financial agreement. The problem with that? Well, it’s in the name; binding. When you enter into one of these agreements, you are bound by it (even if the eventual interpretation of your agreement is contrary to what you thought you were binding yourself to). Some specific questions which are currently unclear in this area of law include:

• What is the effect of death on a Binding Financial Agreement? Currently, a party may be bound by the agreement despite the death of the other party.
• What is the significance of the time and date of separation to spousal maintenance provisions in binding financial agreements?
• If there is a dispute over your agreement, how can we find reliable evidence considering the agreement may have been decades prior?

In particular courts have been reluctant to uphold binding financial agreements because there has not been full and frank disclosure and proper independent legal advice has not been sought.

IN summary…

We should note that the law in this area is always changing and is currently the subject of much scrutiny and review in family law circles. However, this is even more reason to use the other legal tools at your disposal to protect yourself and ensure you have complete certainty in your legal position.

If you have a family law matter, concerns about your finances in light of a family law property settlement questions about family law and separation in NSW and want to find out more please do not hesitate to contact us on 9688 6023 or email us at info@franklegal.com.au.

 This article is provided to the reader for general information. It is not legal advice. It was written by Andrea Spencer & Emily Graham and edited by James Frank.

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Finance, business and family law, family law property settlement, money and family law, family law property settlement in NSW