Financial agreements allow married and de facto couples to determine how their property will be divided if they should separate, and to address spousal maintenance issues between them, rather than having the court determine their financial issues on separation.
Since financial agreements were first introduced in Australia in 2000, there have been a number of court cases where the validity of an agreement has been tested, which seems to have given rise to the misconception that financial agreements are somehow not binding or enforceable.
Often, these cases have involved one or more of these issues:
- Inadequate drafting of the agreement: in one particular case, the terms of the agreement were so uncertain that no one had any idea how it was supposed to work.
- Inadequate provision of legal advice to the spouse parties: one of the cases involved a non-Australian lawyer giving legal advice to an Australian-based client about the effect of their financial agreement. The court found that Australian Family Law advice can only be given by a family lawyer who is qualified to practise in Australia.
- Instances of fraud or material non-disclosure by either of the parties to the agreement: For example, an "ink wedding dress/tuxedo" type of scenario, where the agreement is only executed a couple of days before marriage. Both parties must have a proper understanding of each other's financial circumstances in order to be able to make an informed decision about whether to sign the agreement.
The changes proposed by the Attorney General's department are aimed at addressing the first two of these issues by removing uncertainties around the technical requirements in the Family Law Act 1975 (Cth) as well as becoming more prescriptive as to what advice lawyers are required to give their clients in relation to financial agreements. Other amendments being proposed include changes to spousal maintenance provisions and superannuation (in particular, un-splittable interests).
The proposed changes, which are open for public comment until 19 June 2015, will ultimately benefit both lawyers and their clients by essentially making it easier to enter into financial agreements and comply with the legislative requirements, and also by making it harder to back out of a financial agreement once signed. An objects and principles section makes it clear that agreements are only to be set aside in "exceptional circumstances".
Irrespective of the proposed changes to the law surrounding financial agreements, couples should be aware that even today, these agreements are absolutely binding and enforceable, provided that they are drafted appropriately by a qualified family lawyer, the agreement meets the conditions required under the Family Law Act, and that both parties to the agreement have received independent and competent legal, not financial, advice.
Essentially, a financial agreement is a type of contract. The importance of engaging an appropriately-qualified Australian family lawyer to draft that contract and provide accurate legal advice cannot be overstated.