What are binding financial agreements (prenuptial agreements)?
Binding Financial Agreements are financial agreements that can be entered into by couples that are married or de facto couples. These agreements can be entered into at the commencement of a relationship, during the relationship or at the time of separation. By entering into these work agreements, you are effectively opting out of the court’s jurisdiction.
- that if you have separated and no longer want to adhere to the terms of the financial agreement agreed to at the commencement of your relationship, you will have to convince the court to set aside the agreement in order for the court to have the jurisdiction to determine your property settlement.
- If you enter into a financial agreement after separation you also opt out of the court jurisdiction. This means that the terms of the agreement do not have to be just and equitable as required by the Family Law Act. If you discover a reason for wanting to set aside the agreement in the future, you will have to apply to the court for the agreement to be set aside.
Our position on binding financial agreements (often referred to as a prenuptial agreement):
Most experienced family lawyers will only agree in very limited circumstances to negotiate, draft and provide the necessary advice for binding financial agreements. These agreements referred to as ‘BFA’s’ or ‘prenups’ are often set aside by the court for reasons such as non-disclosure or significant change of circumstances. A change of circumstance can include having a child together. These agreements are also set aside on grounds of duress and this often occurs if they are entered into shortly before the date of a marriage.
Depending on your circumstances a Binding Financial Agreement may be the only way to quarantine your assets at the commencement of the relationship. You can contact us to discuss your matter as we assess the appropriateness of this type of agreement on a case by case basis.
Does a prenuptial agreement work?
These agreements are often set aside by the court. Some people may envisage that by parties entering into prenuptial financial agreements at the commencement or during the course of the relationship, that it would reduce litigation if the relationship came to an end. In reality, this is not the case. The weaker party to the work agreement almost always attempts to have the agreement set aside on grounds of change of circumstances, fraud, non-disclosure or duress.
A binding financial agreement needs to be constantly updated as the parties’ circumstances change and it is not a once of agreement. It should be amended or reconfirmed for example if parties’ health circumstances change or if parties have children together and one of them is no longer working but taking on the role of homemaker.
In a speech to the NSW Bar Association on 20 May 1999 the then Chief Justice of the Family Court Alastair Nicholson said this in relation to binding financial agreements/ prenuptial agreements:
“In relation to pre-marital agreements, the great difficulty about them is that the bargaining power may not be equal, and in many cases the parties may not have the same degree of objectivity as would a party considering entering into a commercial transaction. A pre-marital agreement is an open ended contract that may extend for 50 years or more and it is impossible for the parties to envision what may happen over that period. “
(..) Many Lawyers are not expert in family law (for the protection of people by means of adequate legal advice) (..) the measure will not reduce litigation in the area and will in all probability increase it. There will be countless arguments about the meaning of contracts; whether there was full disclosure at the time that they were made; whether or not this constituted fraud; and whether there has been a change of circumstances since the agreement was made.
(…) It is unrealistic to expect that these property proposals will reduce… the disputes which end up requiring judicial determination.”
Gillard Family Lawyers offer fixed fee initial consultations to discuss your matter. Contact us today to make an appointment. You will be provided with advice in relation to the setting aside of the agreement and the costs involved in making an application the court.