In Australia parties can enter into an agreement called a
Binding Financial Agreement. Because these agreements can be
entered into prior to a relationship, or prior to marriage, they
are colloquially referred to as 'pre-nups'.
WHAT IS A BINDING FINANCIAL AGREEMENT?
A Binding Financial Agreement is a written agreement between two
people in a life relationship, which sets out how they will divide
their assets and liabilities at the end of their relationship.
WHEN CAN A BINDING FINANCIAL AGREEMENT OR PRE-NUP BE USED?
A Binding Financial Agreement can be entered into either:
Before the relationship starts (the term "pre-nup" is
commonly used to describe these types of agreements);
During the relationship; or
After the relationship is over.
I HAVE HEARD THAT A PRE-NUP IS NOT BINDING, IS THAT TRUE?
The Family Law Act sets out the requirements that must be
complied with in order for the Agreement to be a binding agreement.
Like most agreements, if the agreement is not done properly and
does not comply with the legislation, there is a risk that it will
not be binding. You can ensure that the agreement is binding by
obtaining appropriate advice from an experienced family lawyer when
considering whether to enter into this type of agreement.
WHY WOULD I ENTER INTO A BINDING FINANCIAL AGREEMENT?
People who usually enter into a Binding Financial Agreement
prior to a relationship or prior to a marriage include people
Have greater assets than their new partner, and would like to
protect themselves from the risk that their share of those assets
may be reduced in the event of a separation;
Have children from a previous relationship, and would like
their assets to go to their children rather than their new partner,
in the event of a separation;
Have been through a family separation previously and understand
the cost and time associated with a family law dispute and wish to
avoid going through this again;
Have had family or friends who have had a family law separation
and would like to avoid going through the court system.
IF I HAVE A SIMPLE AGREEMENT, WILL IT COST LESS?
While a simpler agreement will involve less time to draft and
formalise than a complex agreement, a Binding Financial Agreement
is a detailed agreement and requires each party to the agreement
fully disclose their financial position;
exchange documents evidencing their financial position;
Agree to the terms of the Agreement;
Obtain independent legal advice prior to signing the
The above requirements apply regardless of whether the terms of
the agreement are simple or complex. Collating the financial
material to undertake the disclosure process can add to the time
and cost of your agreement.
ONCE I GET AN AGREEMENT, DOES IT NEED TO BE UPDATED?
Your agreement should be reviewed and updated at times when your
relationship changes. For example, if you and your partner buy a
property together and your agreement said that you would keep your
finances separate, it is important to ensure that you obtain legal
assistance to update your agreement, so that it remains
If your circumstances change and you do not update your
agreement, you face the risk of having your agreement
CAN MY PARTNER AND I BOTH SEE THE SAME LAWYER IF WE ARE IN
You and your partner will need to obtain independent legal
advice from separate lawyers. Each lawyer will advise each party
separately about the agreement, and will provide a statement
confirming the advice has been provided.
WHAT ARE THE COSTS OF A BINDING FINANCIAL AGREEMENT?
The costs may vary depending on the terms of the agreement, the
complexity or otherwise of the agreement and who is preparing the
agreement. You should make enquiries about the costs before
deciding whether to proceed with this type of agreement. In any
event, the cost of the agreement will be much less than the cost of
a litigated dispute through the family court system.
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.
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