The Family Law Act (FL Act) makes provision for married couples (and since 1 March 2009 certain de facto couples) who have reached agreement in relation to financial matters to have their settlement documented either in court orders or, alternatively, in a Financial Agreement.
Amendments to the Family Law Act
Prior to 2000, Financial Agreements (then called Maintenance Agreements) had to be approved by a court before the Agreement was binding and enforceable.
In 2000 there were a number of amendments to the FL Act in relation to Financial Agreements. One significant change was the elimination of the requirement for the Agreement to be approved by a Family Law Court. Instead the new requirement was that both parties received independent legal advice which was certified before the Agreement was entered into.
The second significant change was that for the first time in Australia, parties to a proposed marriage could enter into a Pre-Nuptial Agreement. (Note that since 1 March 2009 de facto couples, other than those in South Australia or Western Australia, have also been able to enter into a Financial Agreement under the FL Act, including a Pre-Nuptial type Agreement.)
Two categories of Financial Agreements
The effect of these year 2000 and subsequent amendments is that there are now two different categories of Financial Agreements provided for in the FL Act. The first category is Agreements entered into before a marriage or de facto relationship, or during a marriage or de facto relationship, that provide for how the parties' property (and maintenance) is to be dealt with in the event that the relationship is terminated.
The second category is Agreements that provide how property and maintenance is to be dealt with in circumstances where the relationship has been terminated.
Reasons for entering into a Financial Agreement
It is not uncommon today for a couple who have been living in a stable de facto relationship for some time, to decide to purchase a home or perhaps enter into a commercial venture. In this situation it can happen that one party is providing all of the capital to acquire the property or to commence the commercial venture.
In such circumstances the parties often decide that it is important that this initial contribution be recognised. In order to do this they agree to enter into a Family Law Financial Agreement. There are many other reasons why parties who are married or who are living in a de facto relationship might want to enter into a Financial Agreement which provides for future events. Parties in a same sex relationship can also enter into a Financial Agreement.
Binding nature of Financial Agreements
The intent of the FL Act is that Financial Agreements are meant to be binding (permanent). They cannot be varied, although they can be terminated by the parties, or set aside in certain circumstances by an order of a Family Law Court. Parties can enter into a Terminating Agreement and then enter into a new Financial Agreement.
The binding nature of Financial Agreements is a very important consideration for anyone who is contemplating entering into a Pre-Nuptial Agreement, or even an Agreement being entered into during a relationship. What if there are significant changes in circumstances in the future?
Limitations of Financial Agreements
There have been a number of decisions of Family Law Courts setting aside Financial Agreements (and in particular pre-nuptial agreements) where there has not been proper compliance with the FL Act when the agreement was entered into.
A Financial Agreement entered into by a de facto couple is terminated if they subsequently marry. A pre-nuptial (marriage) agreement has no force or effect if the parties to not marry, even if they commence to live in a de facto relationship.
Third parties to a Family Law Financial Agreement
Since November 2008 third parties to the marriage or de facto relationship have also been able to be parties to a Family Law Financial Agreement. There are many circumstances in which parties to a relationship enter into a Financial Agreement which includes one or more third parties. The parties to the relationship who enter into a Financial Agreement are referred to as "spouse parties".
Some circumstances in which spouse parties might want to enter into a Financial Agreement with a third party could include circumstances where the spouse parties agree to acquire a property with a parent of one of the spouse parties with the intent that the property would include a "granny flat" to be occupied by that parent.
Another circumstance could be where the spouse parties are unable to buy a home because they cannot raise the necessary finance to purchase same, but where the financial institution agrees to loan the spouse parties the necessary funds to acquire the property provided that the parents of one of the spouse parties are also to be the owners of the property (and provide additional security to the financier).
Where parties to a marriage (or a de facto couple) separate and where one of the spouse parties also had a de facto partner (or where one de facto partner was married to someone else) the "other partner" can also be a party (together with the spouse parties) to a Financial Agreement.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.