Will my family lawyer sign my previously prepared binding financial agreement at the first appointment?
It is a question that gets frequently asked when talking to a family lawyer about a binding financial agreement prepared by your partner’s lawyer or your ex-partner’s lawyer. The answer is usually no.
Why all this fuss over an agreement – I know what I am getting myself into
We often hear someone confidently tell us that they are fully aware of what is at stake by entering into the agreement with their spouse or partner or ex, and that executing the document is simply a formality to them. The legislation that governs binding financial agreements requires more than just a signature from a lawyer to formalise the agreement.
Each person entering into the agreement must get independent legal advice from a lawyer who practices in family law. This is a requirement pursuant to the family law legislation that governs these kinds of agreements, and it enables that party to truly understand what the agreement means, what obligations will be created, and what the consequences will be. Most importantly, a person who enters into a financial agreement must be aware that:
- they are giving up rights and entitlements that they would ordinarily been entitled to under the family law legislation; and
- their agreement does not have to fair, just, or equitable.
What happens when I meet my lawyer for the first time?
When you meet with a family lawyer for the first time in relation to a financial agreement, that lawyer will need to get an understanding of your circumstances. This includes obtaining details about:
- the terms of the agreement between the couple or former couple;
- the assets, liabilities, and superannuation that the parties want to divide between them or propose to divide between them;
- the history between you and your significant other, which usually involves determining the various contributions each of you have made or will likely make towards the assets, liabilities, and superannuation;
- the financial strengths of each party and considering ways to equalise the financial strengths of each party; and
- what your entitlements and those of the other person to the agreement may be if there was no agreement.
The lawyer will need to consider the information you have provided and thereafter provide you with the legal advice about the advantages and disadvantages of entering into the agreement amongst many other things. Each agreement is unique to each couple, and so the advice is tailored for the person who is receiving the advice. The advice is captured in writing. This is particularly important if, after the execution of the agreement, one person tries to argue that the requisite requirements for the agreement to bind the parties have not been met.
Furthermore, as a party who is considering entering into a binding financial agreement, you have certain rights and obligations that you can call upon before signing the agreement. For example, you and your significant other must fully disclose your respective finances and this may entail doing so privately or having a formal exchange of the financial documents between you, or you can walk away if the agreement has come about due to fraud or duress (to name a few).
What is a binding financial agreement anyway?
If done correctly, a binding financial agreement is a legally enforceable agreement between a couple that formalises how their assets, liabilities, superannuation, and financial maintenance towards each other will be dealt with in the event of break-up or following a break-up. Couples can enter into such agreements before a marriage, during their marriage, or after the marriage has ended. Likewise, couples in de-facto relationships can also enter into such agreements before their relationship, during their relationship, or after the break-down of their relationship.
For married couples all over Australia and for de-facto couples outside of Western Australia, the specific provisions of the Family Law Act 1975 (Cth) will apply. For de-facto couples in Western Australia, there are specific provisions in the Family Court Act 1997 (WA) and the Family Law Act 1975 (Cth) that will apply. Western Australia has always had a complicated history within the federation, and so precise legal advice is required if you are or think you are a couple with a connection with Western Australia.
Why get a binding financial agreement?
Couples can enter into financial agreements for a variety of reasons. Common reasons usually include:
- asset protection for one party – either due to the assets already in their name or prospective inheritances or wealth;
- one party has greater obligations than the other from which they want to shield the other;
- one party seeks to mitigate risks and reduce the potential fallout from any significant liabilities;
- some agree to merely divide their assets, liabilities, and superannuation, and manage their financial maintenance despite that it favours one party over another; or
- avoid litigation or protracted negotiations and the associated legal costs.
Whatever the reason, the couple must ensure that their binding financial agreement meets the requirement of the relevant laws, and we as your advisor have a duty to you to make sure that this will be capable of holding up to potential scrutiny at some time in the future. In order to ensure the agreement will work in the future, it is not prudent to have the document signed without the requisite enquiries and advice in writing.
Should you wish to discuss this further, please don’t hesitate to call our office and ask to speak to one of our family lawyers.
About the Author: Stewart is a senior family lawyer at Lynn & Brown Lawyers. Stewart has a wealth of family law knowledge and experience. His pragmatic approach in dealing with matters enables his clients to make informed decisions.