Just sign here - the advantages and pitfalls of pre-nups!

Since 1 March 2009, persons entering into a de facto relationship can also enter into a Financial Agreement under the Family Law Act.

A Financial Agreement in anticipation of marriage (or a de facto relationship) can specify how the property and financial resources of the parties will be dealt with in the event of the marriage or relationship breaking down, along with other matters.

Preparing Financial Agreements

Unlike commercial contracts (which need not even be in writing) there are very complex formal requirements for the preparation of Financial Agreements. Even agreements prepared by lawyers have been set aside for failing to strictly comply with these requirements. Competent and attentive legal assistance is vital if the agreement is to provide peace of mind and certainty for the future. Agreements are also not binding unless both parties have had independent legal advice which is evidenced in the way specified in the Act.

Can a Financial Agreement be set aside?

The ability to sign an agreement which will prevent the Family Court from stepping in upon separation is not absolute. Just like a normal contract, the agreement can be set aside for a variety of reasons including duress, mistake and misrepresentation. However, there are also additional reasons why a financial agreement can be set aside by the court.

Whilst they cannot all be listed here, they include seemingly vague reasons such as the agreement becoming “impracticable” after it was made, non-disclosure of a “material matter” and also potential “hardship” to the main parent or a child arising out of a “material change in circumstances”. None of these words are defined in the legislation, and there is still uncertainty as to exactly how the courts will interpret the legislation.

Good legal assistance is crucial, and we find it almost inconceivable that a person without legal qualifications would be able to prepare an agreement which would withstand the complex challenges posed by the Act (even some solicitors refuse to prepare these agreements because of their highly technical nature).

How can I minimise the risk?

A prudent solicitor can minimise the risk of your agreement being set aside at some time in the future. The many options available include sunset clauses, which state that in certain defined situations (or after a certain time) the agreement will be reviewed. They also include reasonable provision clauses, which provide for a party to the agreement taking a “bonus” if certain defined situations arise (for example – having residence of a child, or suffering a severe injury).

Attention to detail and creative thinking is needed to deal with the many future circumstances which could arise, which may not even have been considered at the time the agreement is signed.

In summary, Financial Agreements provide an opportunity for couples to have increased certainty as to their financial future. However, unless extreme care is taken in the drafting, and legal assistance sought, many couples will unfortunately end up with a false sense of security, and an agreement that is liable to be irrelevant in the event of a breakup.  

If you are contemplating, or currently have a Financial Agreement you would like reviewed we would recommend you seek legal advice. We encourage you to contact our office to make an appointment with one of our solicitors to obtain advice on your situation on (07) 4963 2000 or through our online contact form below.