Are Binding Financial Agreements still relevant?
When Binding Financial Agreements (or, to use the vernacular, "pre-nups”) were introduced in the Family Law Act some time ago, they became a very popular tool at the commencement of a relationship to avoid the uncertainty of what would happen should a couple separate.
They have declined in popularity in recent times due to complications that have arisen in the Family Court where agreements were drafted without legal advice.
When done correctly, Binding Financial Agreements remain a useful part of Family Law. Often agreements provide that neither party will, upon separation, seek maintenance from the other. Those agreements provide financial security, and are relatively simple to draft and make binding (provided the legislation is complied with).
Agreements can also provide that each party retain the property that they bring into the relationship, which is particularly useful in second marriages. When both parties come to an agreement such as this it is more likely to be upheld. Another example of a Binding Financial Agreement that is likely to be upheld is when an agreement sets out how the less wealthy party will be catered for upon separation and in particular the children of the relationship, when there is inequality with respect to assets owned by parties prior to the commencement of the relationship.
There are on the other hand certain agreements that are fraught with danger. An agreement prepared close to a wedding date will often be set aside if one party can demonstrate that they were put under duress to sign it. Agreements prepared hastily, without proper financial disclosure, are also likely to be set aside if challenged. If a party receives inadequate legal representation in having an agreement explained to them, or has language or other cultural difficulties in understanding the agreement, it may also be set aside. Finally, if the legislation is not followed to the letter, in relation to what an agreement must contain, and the advice that must be given, then it will be set aside.
People considering entering into Binding Financial Agreements do so hoping that their assets will be protected, and they will be able to avoid litigation. Often, they become embroiled in lengthy litigation to set the agreement aside, only to find that the protection that they thought it afforded them did not exist.
There is always the risk that a Binding Financial Agreement may be challenged as there are no guarantees in litigation. However, if prepared by an Accredited Specialist in Family Law, with the proper disclosure provided by each party and the legislation adhered to, Binding Financial Agreements remain a helpful tool in family law to provide protection upon the breakdown of a relationship.
For advice on entering into a Binding Financial Agreement, please contact: