Separation brings financial decisions forward at a time when much else remains unresolved. A binding financial agreement is one of the ways two people record how their property, superannuation and other financial resources will be divided, without asking a court to decide that division for them. The requirements for these agreements sit in the Family Law Act 1975 (Cth), and they are formal ones, so an agreement that does not meet them may not bind either party. For a person separating with a home, a superannuation interest or a share in a business to deal with, the practical questions are what an agreement of this kind can cover, what has to happen before anyone signs, and what to look for in a draft.
What a binding financial agreement covers
An agreement of this kind addresses property and financial resources as between the two parties. Property is read widely in family law, so the home, bank accounts, shares, vehicles, debts, superannuation interests and an interest in a company, partnership or trust can all form part of what the parties divide. Many agreements also address spousal maintenance, meaning financial support of one person by the other after separation.
A financial agreement does not resolve arrangements for children, which follow a separate process. What the parties want from the document is certainty about the financial side, and that puts weight on the drafting. An agreement that says nothing about part of the pool leaves that part open.
When people make a financial agreement
The same framework applies to married couples and to de facto partners, and the timing varies. Two people can make an agreement before a relationship begins, during it, or after it ends. An agreement made at the start of a relationship commonly addresses the assets each person brings into it, including an inheritance or an established business.
After separation the document does a different job. By that stage the parties have negotiated a division, and the agreement records it in a form each of them can rely on. Most people who go looking for information about these agreements are at that second point, with a settlement in view and a question about how to make it hold.
Superannuation, a business or a trust in the pool
Superannuation can form part of what an agreement deals with, and a split takes effect through the superannuation fund rather than between the parties directly. The trustee of the fund has to be able to act on the terms, so current member statements belong on the table before anyone settles on a figure. A fund will decline terms it cannot administer, and that is a drafting problem best solved before signature.
An interest in a private company or a family trust raises questions that a bank account does not. Who holds the shares, who controls the trust, and what the company constitution or trust deed permits all bear on what can move, to whom and when. Where one party retains a business, the parties commonly meet the other’s share of the pool with a payment or a transfer of other assets. In that case the agreement needs to state the amount, the date for payment, any security, and the consequence if the payment does not arrive on time.
Independent advice from your own family lawyer
Each party takes independent legal advice before signing, from their own family lawyer, about the effect of the agreement and about its advantages and disadvantages. One lawyer cannot advise both parties. The Federal Circuit and Family Court of Australia publishes guidance on financial agreements for people considering one, and the advice a lawyer gives on a draft works through the same ground in detail.
That advice goes past the form of the document. A lawyer reading a draft for one party will ask what each person has disclosed, whether the figures are current, and how the proposed division compares with the range of outcomes a court could reach on the same facts. Full and frank disclosure matters here, because the strength of an agreement depends on the information behind it. The questions are the ones that arise in any family law property settlement: what sits in the pool, what each person contributed, and what each person needs going forward. Mazzeo Lawyers acts in family law matters, including matters before the Federal Circuit and Family Court of Australia.
What makes an agreement binding
The Act imposes formal requirements, among them writing, signature by both parties and independent legal advice for each of them. Those requirements are technical, and whether a particular document satisfies them is a question for the lawyer advising on it. The consequences of a defect can be significant, so ask for a direct answer on that point before you sign rather than assuming it afterwards.
Informal arrangements do not meet the standard. A division written out at home, an exchange of emails, or a spreadsheet both parties accepted is not a binding financial agreement, whatever the parties intended by it. Material of that kind may still carry evidentiary value in a later proceeding, but it does not produce the certainty the parties were looking for.
What to check before signing
Before signing, put these questions to your own lawyer, and where an answer is unclear, back to the other party:
- Does the agreement list every asset, debt and financial resource, including superannuation and any interest in a company or trust?
- Do valuations, member statements and business accounts support the figures, or are they estimates?
- Does the agreement say when each transfer or payment happens, and what follows if a date passes?
- Does it address spousal maintenance, or does it leave that question open?
- What happens if a sale falls through, or if circumstances change before the parties have performed the agreement?
An agreement that answers those questions on its face gives both parties less to argue about later. Where a draft is silent on one of them, that silence is the thing to raise.
How the process usually runs
The parties begin with disclosure. Each person sets out what they own, owe and control, with documents behind the figures, because neither the negotiation nor the advice means much without them. A valuation of a property or a business can take some weeks to obtain, so that work tends to set the pace of everything after it.
Negotiation follows, and one party’s lawyer prepares a draft. The draft then goes to the other party, who takes advice from their own lawyer, and amendments at that stage are ordinary. Once both parties sign, the practical work begins: transfers, refinancing, and, where the parties have agreed to split superannuation, the documents the fund requires.
Frequently asked questions about binding financial agreements
Yes. Each party takes independent legal advice before signing, so the same lawyer cannot advise both of you.
No. An agreement of this kind operates between the parties without a court approving it, which is why the formal requirements and the quality of disclosure carry so much weight.
Yes. A superannuation interest can form part of the division, and any split takes effect through the fund, so the terms have to suit what the fund can administer.
Yes, in limited circumstances. The Act sets out the grounds on which a court may set an agreement aside, and a lawyer can advise which of them could apply to a particular agreement.
Getting the figures clear before you commit
The first step is an accurate picture of the pool: current valuations, loan balances, superannuation member statements and, where a business sits in the mix, financial statements for that business. Where the figures behind a term are uncertain, the term is harder to rely on afterwards. If another party has handed you an agreement with a date attached to it, take advice before you respond to that date.
Mazzeo Lawyers is a Melbourne litigation practice serving clients throughout Victoria, with family law among its practice areas. The Principal, Nick Mazzeo, began practising law in 1994, and both Nick Mazzeo and the firm are members of the Law Institute of Victoria. Every matter the firm acts in receives the time and personal attention of an experienced lawyer. All enquiries are handled in strict confidence, and an initial conversation does not commit you to anything.
If you are considering a financial agreement, or another party has asked you to sign one, you can contact our Melbourne office to discuss where you stand. Arrange a confidential discussion about your matter.
