How to enter a Binding Financial Agreement in NSW

It’s important to consider entering a binding financial agreement before getting married or living together in NSW. Litigation causes emotional and financial distress, not only to the parties involved, but also to their kids and family. Having a binding financial agreement helps you reduce the stress of the separation, so you can move on faster.

We all dream of having a ‘happily ever after,’ and spending the rest of our lives with the love of our life. However, reality sometimes has different plans and we end up separating, no matter how hard we tried to hold on. Some married and de facto couples break up amicably and even become friends long after ending the relationship. While this is ideal, not all relationships that break down are lucky enough to become friendly. Some couples go through ugly and lengthy arguments that often lead to expensive legal disputes.

What is a binding financial agreement?

A binding financial agreement in NSW is enforced under the Family Law Act 1975 (Cth). It also applies to de facto relationships and same-sex marriages. Moreover, it follows the same process as in other territories, except for Western Australia.

Binding financial agreements enable couples to agree on how to manage and deal with their financial matters when their relationship breaks down. It is a legal document that outlines your and your partner’s reasonable terms for dividing your assets. In particular, it covers your personal and business assets, superannuation, financial and tax liabilities, inheritance and spousal maintenance.

Why do you need a binding financial agreement in NSW?

A binding financial agreement promotes a more amicable separation when your relationship is no longer workable. It determines how you will fairly and reasonably manage your assets and finances during the course of your relationship. It covers issues such as:

  • Buying and owning properties
  • Dividing solely owned and jointly owned properties
  • Dealing with sole and joint liabilities
  • Managing your other financial resources
  • Administering your estate plans, family-owned business and properties, and inheritance

Consider entering a binding financial agreement if you:

  • have more funds and assets than your partner before the start of your relationship
  • are earning more than your partner
  • have a family-owned business
  • are entitled to an inheritance or trust from your parents or relatives
  • have children from a previous relationship
  • are previously divorced or separated

A binding financial agreement allows you and your partner to decide the terms for dividing your assets in advance. Hence, it is advisable to enter an agreement before you take your relationship to the next level and get married or live together as a de facto couple.

When should you consider entering an agreement?

You can enter a binding financial agreement at any point of your relationship – whether before, during, or even after. There are several types of agreements available depending on your and your partner’s circumstances:

  • Cohabitation Agreement – for de facto couples or partners who are planning to live together as a de facto couple.
  • Pre-nuptial Agreement – for couples planning to get married
  • Post-nuptial Agreement – for couples who are already married
  • Separation Agreement – for couples who have decided to end their relationship and separate.

Entering a binding financial agreement requires your and your partner’s mutual decision to protect both interests. Moreover, the both of you should be satisfied on how your terms are set out in the agreement. Hence, you and your partner are required to seek independent legal advice to ensure you understand exactly what you are agreeing to.

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How to enter a binding financial agreement in NSW?

A financial agreement is pretty straightforward with setting out the terms for the separation of your assets. However, the process required to make it legally binding and enforceable in NSW can be quite complex. To make your agreement binding, you and your partner must:

  1. sign the agreement.
  2. receive independent legal advice on:
  • whether you need to enter an agreement or not
  • the effects of entering a binding financial agreement on your right
  • whether the terms of the agreement are fair and reasonable
  • the advantages and disadvantages to you and your partner at the time the agreement is being made
  1. attach a Statement from both of your legal counsels confirming that you have received independent legal advice to the agreement.
  2. ensure the court has not terminated or dismissed your agreement.
  3. both have the original agreement (duplicates) or one of you receives the original, and the other gets a certified copy.
  4. sign a declaration that you are living separately with no further plans to get back together (once separated).

If you have satisfied the above process, then your financial agreement will be considered binding and enforceable in NSW. However, it is imperative that an experienced Family Lawyer drafts and prepares your agreement. This ensures that your agreement is in compliance with the Family Law Act and can be upheld against challenges.

What to consider when entering an agreement?

A binding financial agreement gives you more control and freedom over how to divide your assets while avoiding future claims. However, the courts in NSW can easily dismiss a binding financial agreement. Some reasons for a dismissal include:

  • if the agreement was made by fraud or duress
  • whether you or your partner entered the agreement to defraud a creditor
  • if the agreement does not comply with legislative requirements and is considered void
  • when you and your partner’s circumstances have changed, making the agreement impractical to carry out
  • if there has been a significant change in your and your partner’s circumstances since the agreement was made, which could cause hardships for either of you
  • you or your partner engaged in conduct, that is unconscionable during the making of the agreement

Hence, it is imperative that you or your partner provide a full disclosure of your assets and circumstances. This will help you make more informed decisions about dividing your assets and liabilities.

It is also important to have your agreement reviewed and updated when your and your partner’s circumstances change. In particular, an update of your agreement is necessary when the circumstances involve having a child or children.

How can VC Lawyers help you enter a Binding Financial Agreement in NSW?

The process for entering a binding financial agreement in NSW can be quite complex. However, if correctly executed, your agreement can be beneficial for both you and your partner.

A binding financial agreement is more than just a document detailing your assets and how you will divide them. It also helps you protect the investments that you have worked hard for and the assets that your family will pass on to you. Entering an agreement also gives you a sense of comfort and certainty about your future financial resources. Moreover, it can help you and your partner maintain a friendly relationship, so you can work together in the long-term.

VC Lawyers have Family Lawyers with extensive experience in providing legal advice, and drafting and preparing financial agreements. Whether you are married, getting married or a de facto couple, we can guarantee your agreement is binding and enforceable in NSW.

Our Family Lawyers will carefully consider your circumstance and identify loopholes to ensure the court doesn’t terminate or dismiss your agreement. We will negotiate your terms properly to achieve the most favourable and reasonable outcome for you.

Reduce the chances of going through ugly arguments with your partner, and expensive and lengthy court disputes that can lead to unfavourable results. Talk to us and find out how VC Lawyers can help you prepare a binding financial agreement.

NB: This blog post is neither a legal advice nor intended to be such, and is only for general information. The same should not also be taken as a financial or commercial advice. The reader must personally consult their professional adviser/s on the contents of this blog post. VC Lawyers is not liable for any loss or damage, direct or consequential, as a result of the reader’s or a third person’s misconstruction of the wordings or use/misuse of the contents of this blog post.

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Pelagio Palma Jr., BA, LLB, LLM, MBA

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