A financial agreement is a document that deals with property and spousal maintenance between parties. The Court’s approval to same is generally not sought. Couples can enter into a financial agreement before marriage or the commencement of cohabitation, during their relationship or after separation or divorce.
Financial agreements entered into before marriage or cohabitation or during the relationship, provide for the division of assets and payment of spousal maintenance should the relationship breakdown. There is some concern entering into such agreements, as the means and needs of each party at the relevant time of separation is unknown and not something easily, or accurately predicted. Accordingly, an agreement reached during these times could result in a property settlement that would not be considered in the reasonable range of outcomes if it were to be determined at the relevant time of separation.
To overcome these issues, parties should be reviewing and entering into amended financial agreements to reflect contributions made and changes in circumstances, such as the birth of children. This can be a costly and tedious exercise and generally not attended to.
Each party requires independent legal advice and a statement confirming this must be attached to the agreement.
A financial agreement is not required to be fair, whereas property settlement finalised with consent orders is required to be just and equitable. A financial agreement cannot be set aside on the ground of financial hardship if the parties have no children. The freedom to negotiate a settlement should the relationship breakdown and resolve by way of consent orders or court intervention should be given significant consideration if contemplating entering into a financial agreement.
There may be some circumstances that financial agreements would be appropriate, for example, couples or one party may have children from previous relationships and may wish to preserve certain assets for their children and protect said assets from any future property settlement claim.
If parties are entering into financial agreements following separation, they may do so as a release from future spousal maintenance or to document their agreed property settlement. As financial agreements are not required to be fair, nor are they approved by the Court, there is no affirmation as to the just and equitableness of the agreement based on the parties means and needs at that time. In these circumstances, parties should consider consent orders or court intervention.
Financial agreements can be set aside in certain circumstances including an agreement obtained by fraud, a void or unenforceable agreement, there has been a material change in circumstances since making the agreement (circumstances relating to the care, welfare and development of a child of the marriage), unconscionable conduct or it is impracticable to carry out the agreement. Any application to set aside a financial agreement requires evidence and in most cases, is difficult to establish because of the requirement for a certificate of independent advice attached to the agreement.
Whislt not required to be fair, should an application to set aside the agreement be filed in the Family Court of Australia or the Federal Circuit Court of Australia, and the Court is satisfied that the ground to set aside has been found, the onus then falls upon the other party to show that the agreement was fair, just and reasonable.
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