Separating or divorcing a spouse or de facto partner will include separating and dividing your finances. If you leave it to the court to decide, it can take time to complete.
One way that couples can remediate this situation is to create a binding financial agreement either before the relationship progresses to de facto (living together unmarried), prior to marriage, or shortly thereafter the marriage, or after separation. You can also create one during your divorce preparation process. But if things are contentious, chances are the agreement you produce will be rushed, not well drafted, and be set aside by the court if there is a mistake.
Separating or divorcing a spouse or ending a de facto relationship will include separating and dividing your finances. If you leave it to the court to decide, it can take time to complete and may not be equitable.
One way that couples can remediate this situation is to create a binding financial agreement either before the relationship progresses to de facto, before the wedding, or after the marriage commences. You can draft and create an agreement at any time during the relationship, even during the divorce preparation process. But if things are contentious, chances are the agreement you produce will be rushed, not well drafted, and be set aside by the court if there is a mistake.
What Is A Binding Financial Agreement?
You may have heard the term “prenuptial agreement,” or “prenup.” A binding financial agreement is pretty much the same thing: a contract between the two parties created during the relationship, or separation and/or divorce later down the road. The intent is to decide on asset, property and liability division without going to court or to protect assets acquired before the commencement of the relationship. Spousal support may also be included.
Why would a couple make such an agreement? Because no one knows what the future will bring for you and your partner, and the contract is one way to help control the outcome of the relationship’s financial closure. The agreement lets you decide long before things become difficult how you want to divide things.
The binding financial agreement sets out the terms by which the property and/or financial assets will be divided should you and your partner decide to end the relationship. The agreement is made to prevent the division of assets and property in the hands of a judge who doesn’t know you. Therefore, the agreement tells the court how you and your partner have decided to split everything beforehand.
What Does That Mean for You and How Does It Affect You During A Divorce?
Creating the agreement means that you and your partner or spouse have already decided on how to divide and distribute your property and assets prior to your separation, and don’t need the court to handle this decision. It requires considerable research and intense discussion, which can also lead to a better foundation for the future.
Done correctly, the binding financial agreement will save both parties time, money, and emotional distress in the event the relationship ends. It will also help reduce or eliminate conflicts so that you and your partner can work together, concentrate on your children’s best interests, and get on with your life.
This is precisely why the discussion should occur well in advance, and not during the divorce discussions to avoid rash decisions that may not be in anyone’s best interest.
Can You Contest A Binding Financial Agreement?
It is possible, and your success or failure hinges upon how well the agreement was drafted, and if your own lawyer thoroughly reviewed the document, negotiated for you, and made good recommendations.
Another factor is when the agreement was signed. If the agreement is signed just before a wedding, one spouse could argue that they were given the choice of signing or having the wedding cancelled. This is especially true if one spouse was financially disadvantaged.
Other reasons for contesting a binding financial agreement include:
- If one party is coerced into signing the agreement with mistakes, misrepresentations, or fraud
- If one party fails to disclose all their property, assets, and liabilities to the other party
- If one party makes the agreement without the other
- When circumstances change substantially and enforcement of the agreement becomes impractical, or when a child or children become involved
Both parties and their lawyers need adequate time to review and negotiate any required changes, which could take several months. This process should start long before mailing wedding invitations, or many months prior to the two-year mark for a de facto relationship. If one party is rushed into signing a hastily written financial agreement, they may successfully contest the agreement.
How Do You Get One? How Much Does It Cost?
If you feel it’s applicable, begin discussing and drafting your agreement right away. Whether you’re moving in together, lived together for more than two years, or are planning to be married, start the process now, and don’t rush anything. Both parties must fully disclose all their assets, liabilities, property, and anything else that will be brought into the marriage.
When you’re ready to solidify the agreement, each partner should see their own separate legal counsel for review and finalisation. Both sides will determine if the agreement is, in fact, legal, or favours one party over another.
Once both parties and lawyers agree, the agreement can be finalised. The agreement becomes active upon signing by both parties and their lawyers. A binding financial agreement saves time, is cost effective, and helps make the process a little easier for everyone.
But you must start discussing and drafting the agreement well in advance of your wedding or other significant event. Don’t wait until two weeks prior to the wedding to start your agreement and expect it to be signed the day before the wedding. There isn’t enough time. Otherwise, the agreement can be set aside and invalidated, leaving you at the mercy of a court decision.
The average cost of a binding financial agreement is between $2,000 and $5,000 and will depend on the complexity of your case. That is, if you and your partner agree to everything prior to bringing in legal representation. For more complicated cases, the cost could go as high as $12,000.
The more you can do in advance, before bringing in lawyers, the easier and less expensive things will be for both of you.
Who Can Help You?
Whether you’re drafting your agreement in advance of wedding plans, in a current relationship (married or de facto) or making plans for separation or divorce, you and your partner can begin drafting a binding financial agreement. Done correctly, the agreement protects both of you and ensures that you’ll leave the relationship with everything you brought into it.
We strongly suggest working with a family law lawyer who understands these agreements and how they work. If your partner has already started the process, a family law lawyer can review the agreement for you, help with negotiations on your behalf, make recommendations, and finalise everything when both parties agree.
Savannah Legal offers a free 1-hour consultation. We take the time to understand your situation, concerns and needs, before providing you with a legal plan outlining your options. Our goal is to give you affordable legal advice while lifting a burden off your shoulders. Book your free consultation today.