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A financial agreement is an agreement between couples (and in some cases third-parties) that outlines how they will resolve their financial matters in the event of separation.

There are three types of financial agreements:

1. pre-nuptial agreements which are entered into prior to the commencement of a de facto relationship or prior to marriage;
2. post-nuptial agreements which are entered into during a de facto relationship or marriage; or
3. post separation agreement where parties outline their negotiated property settlement after separating.

The pre-nuptial and post-nuptial style agreements allow parties to forecast and agree on how they may divide their respective assets and/or spousal maintenance in the event of separation in the future.

Essentially it is an insurance policy for the relationship.

Some of the circumstances where a party should consider a financial agreement are as follows:

1. Where one party has greater assets than the other;
2. Where both parties have assets they acquired prior to the relationship, which they wish to protect;
3. Where a party is part of a business, family trust and/or company and want to protect their interest and the entity from being exposed to a separation;
4. Where parties may in future receive an inheritance which they wish to protect;
5. Where a party may have received a large sum of money or will receive a large sum of money (for example from their parents) that they wish to protect; or
6. Where parties have children from a previous relationship for which they seek to protect their financial interest.

There are many advantages to people entering a financial agreement including that doing so allows them to enter into a negotiated agreement amicably and avoid the possibility of litigation in the future. It also can provide parties and their extended families peace of mind knowing that assets are protected.

There are various requirements to ensure a financial agreement is binding including having them documented in writing and each party receiving independent legal advice.

If you in a relationship or entering a de facto relationship or marriage it is important that you consider your options in relation to asset protection and what might occur in the event of separation.

Similarly if you have a loved one who is part of a family business, trust or company or may be set to receive an inheritance in future and at risk of a relationship breakdown then we recommend a financial agreement be considered to protect those entities.

For more information or assistance, please contact Macpherson Kelley’s experienced Private Clients (Family Law) team.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.