What Needs to Be on a Binding Financial Agreement?

Binding Financial Agreement

In 2020, there were just under 80,000 marriages in Australia. There’s no doubt these couples were still enjoying newly wedded bliss throughout that year. Ironically, during the same period, almost 50,000 couples went their separate ways.

The statistics may seem alarming, but Australia’s divorce rate has actually been on the decline for the past two decades. The highest rate during this period was 2.9 in 2001. In 2020, it was 1.9 or approximately two divorces granted per 1,000 people.

Most unions begin with the hope of a long-lasting bond. However, this isn’t always the case. Love once shared can turn into contention during a separation or divorce.

A binding financial agreement can help couples avoid this. It provides a greater opportunity to make sure assets and shared investments are split fairly. 

But binding financial agreements must include some key elements to achieve this. Read on to find out what they are.

Signing a Binding Financial Agreement

What Is a Binding Financial Agreement?

A binding financial agreement outlines the distribution of a couple’s individual and shared assets when the relationship ends. It can also include maintenance and parenting arrangements if there are children involved.

It’s often also referred to as:

  • A separation form
  • A de facto separation agreement
  • A marriage separation agreement
  • A financial agreement
  • A legal separation

Couples can enter into this type of agreement before, during, or after a marriage or de facto relationship. Agreements made before marriage are more commonly referred to as prenuptial agreements. The other types of binding financial agreements are:

  • Post-nuptial agreements
  • Separation agreements
  • Cohabitation agreements
  • Divorce agreements

Are you entering into a binding financial agreement after separation? Then you must do so within a year after the granting of an order of divorce.

These agreements do not always follow standard family law principles. This is evident when considering the division of assets.

Your agreement should be tailored to your circumstances. This does not always mean it will be fair or reasonable for each party.

But, the agreement must follow the requirements of the law. Hire a family lawyer who can advise you. They will ensure your agreement is fair and appropriate based on your circumstances.

Binding Financial Agreement Template

There are several elements contained in a binding financial agreement. They range from basic information, such as the name and address of both parties, to asset details.

There are important dates to include such as:

  • The relationship start date
  • The date you started to live together
  • Your wedding date

These should be a part of your binding financial agreement template. In the case of a prenuptial agreement, state your intended marriage date.

Here are some of the other main items:

Division of Assets

Your agreement should include a list of the properties and financial assets of both parties. Selling a shared residence? The agreement will need to have details of the value of the home and the selling price.

These are usually schedules attached at the end of the document. They’re usually numbered and classified in categories such as:

  • Assets and liabilities of Partner One
  • Assets and liabilities of Partner Two
  • Jointly held assets and liabilities of both partners

It also includes any superannuation entitlements. Having these details will help to guide your lawyer. It also makes it easier to determine if your compensation is fair.

Arrangements for Children

Your family structure might be a traditional nuclear one, a blended one. Or it can be something between the two. Regardless, if children are part of the union, it will affect your agreement.

There should be provisions included for child support. This should cover costs related to:

  • School fees
  • Medical, dental, or specialist costs paid out of pocket
  • School items such as books, equipment, uniforms, or field trips
  • Extra-curricular activities
  • Health insurance

It may also cover other child-related expenses. The division of responsibility for each child is usually agreed upon by both parties. It is separate from spousal support or maintenance.

Spousal Maintenance

Spousal maintenance or support is also an additional item in the financial agreement. It could include weekly or monthly payments based on the parties’ agreement.

It represents the continued obligation of one party to maintain the other. It is usually based on the income of both.

In the case of one partner earning more than the other, the aim is to maintain the other close to the standard they enjoyed while in the marriage.

Incidentals

Incidental issues can relate to any of the areas above. It includes any ancillary or other matters.

It often occurs if there is a material change. This might be a change in the needs of either party, their children, or the property involved.

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Requirements of a Binding Financial Agreement

Your binding financial agreement should have the elements identified above. The relationship of the parties involved must reflect one of the following: 

  • The parties are about to get married or are beginning a de facto relationship
  • The parties are currently married or in a de facto relationship
  • The parties are already separated or divorced 

Once this is the case, the following requirements will make your agreement enforceable or legal:

  • Both parties enter the agreement of their own free will
  • They should both receive individual legal advice about the specific type of agreement
  • The signatures of both parties, only after the above
  • A statement from both parties indicating that they each received legal advice
  • Each partner should have a copy of the signed statement of the other partner
  • The agreement hasn’t been set aside or terminated by a court for any reason
  • It includes a declaration of separation or it’s signed after the divorce

Once an agreement meets these conditions, it’s recognised anywhere. Many courts in the following states will enforce a binding financial agreement: Victoria, Australian Capital Territory, Western Australia, New South Wales, Tasmania, Queensland, and South Australia.

However, the agreement must comply with the guidelines stated in the Family Law Act. There may be specific cases, although rare, where there might be a challenge to its validity and enforceability. 

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Can You Terminate a Binding Financial Agreement?

There are special circumstances that will allow you to terminate a binding financial agreement. The following are outlined in the Family Law Act and allow a court to set aside the agreement if:

  • It covers a superannuation entitlement that can’t be divided
  • It is fraudulent or may include any material non-disclosure
  • There are issues with superannuation entitlement payments
  • There was intent by one party to defraud a creditor
  • There was unconscionable behaviour by one party during the drafting of the agreement
  • It does not comply with the law governing these types of agreements or its preparation was improper
  • The occurrence of a material change in circumstances after finalisation of the agreement, that may cause hardship upon enforcement of the agreement
  • Inability to enforce the agreement due to other circumstances

If you want to terminate your agreement, or you think that your agreement isn’t valid, you should consult your lawyer.

Benefits of Binding Financial Agreements

Most separations can be emotionally exhausting. A prenuptial agreement allows you to focus on getting through the break-up. It represents a pre-determined assignment of assets.

It eliminates what can sometimes be a combative period in the relationship. It can make the separation process much easier. A financially binding agreement can clearly define the distributions of assets acquired before and during the marriage.

Some other benefits include:

  • It helps to divide assets in a way that is suitable to both parties
  • The protection of existing assets or future inheritances
  • It helps parties avoid financial disputes when the relationship ends
  • It makes provisions for the children involved
  • It protects the interests of the children from previous relationships
  • It helps to preserve any family businesses involved 
  • It aims to maintain the lower-income earner
  • A prenuptial agreement protects properties accumulated before the marriage
  • It’s usually less costly than a drawn-out legal court battle

The earlier you draft one, the better. Once you file for a divorce, you should draft your agreement before the stipulated deadline.

Binding Financial Agreements Melbourne

A Resolution That Works for Both Parties

Most separations are not easy. They are often filled with regret, pain, and loss. It’s a sad reality after investing years of your life in what you believed would be your future.

A binding financial agreement may not eliminate the pain. But it does make the process of separation much easier. This is even more evident in the case of a prenuptial agreement.

Binding financial agreements aim to distribute assets equitably and provide for both parties involved. But it must be valid and enforceable.

Binding financial agreement lawyers can guide you during what may be an extremely vulnerable period in your life. Make sure you get a lawyer that is right for you.

Melbourne Law Studio can help. Our divorce lawyers have the experience and expertise you need. Get a FREE, no-obligation consultation today!

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