One of the hardest parts of separating is dividing up the assets – deciding who gets what. It’s a frequent source of conflict and resentment.
Sometimes couples try to avoid potential conflicts by entering into a Financial Agreement. The idea is that if the parties agree in advance to the financial terms of a separation, it will (hopefully) save all the bitter wrangling that follows if and when it all ends.
A Financial Agreement is a document that specifies what is to happen to the property and/or spousal maintenance arrangements in the event that the couple separates. Married and de facto couples, including same-sexed couples, can enter them prior or during their relationships.
But do they work? The answer is; it depends. In some circumstances yes, but if things go wrong they can be disastrous.
Unfortunately no one can anticipate the future. What may seem fair at the time of marriage or the beginning of a relationship often proves disastrously unfair after a few years, particularly after the birth of children, or after unexpected events which may change the financial relationship between the partners.
In some cases, the agreements are not even fair to start with. When people are in love and beginning a relationship, their judgment may not be very sound and they may readily agree to terms that are not in their interests. Commonly, one partner in a stronger financial situation may seek to protect it at the expense of the other. This may be at the cost of their prospects of happiness and success in their relationship.
If the arrangement is unfair, or contains technical errors it may be contested and overturned by the courts anyway. A Financial Agreement is most likely to be upheld it is comprehensive, clearly understood and fair, and not too different from what the Family Court would uphold.
Where a Financial Agreement can be a good idea is in the case of people going into second or subsequent relationship, and where they have built up significant assets, and where the interests of children of previous relationships need to be protected.
So the message is; people should be very cautious about entering into Financial Agreements, especially where they sign away their financial entitlements for no particular reason.
Generally speaking, is it probably much better not to enter into a Financial Agreement, but rather rely on the processes and entitlements that that apply to everyone under the Family Law, and do everything possible yourself to make the relationship mutually beneficial and successful.
But if you are thinking of entering into a Financial Agreement, or if you are asked to do so, you need to get good legal advice and representation to make sure the Agreement is properly drawn up by an experienced family lawyer, so it protects your interests.