Relationship + Separation + Property + Handshake Agreement = Not Legally Binding? – Part 2
Part 2 of our 2 part series on legally binding de facto and matrimonial property matters:- Considering Binding Financial Agreements
Last week, we reminded you that if you want to fully and finally resolve matrimonial or de facto property matters, you need to formalise your agreement by way of Consent Orders or a Binding Financial Agreement.
So what is a Binding Financial Agreement?
A Binding Financial Agreement is just that – an agreement, between parties, regarding financial matters, which is binding.
Binding Financial Agreements can cover matters such as:-
- How all or any of the property or financial resources of the parties acquired during the marriage / relationship is to be dealt with
- Maintenance of the parties
Married, soon-to-be-married, divorced, separated or de-facto (including same-sex) couples can all enter into Binding Financial Agreements to finalise their financial matters.
In order to be binding, the Agreement must:-
- Be in writing
- Be signed by all parties
- Before signing the agreement, each of the parties must be provided with independent legal advice about (and a copy of that advice given to the other party):-
- The effect of the Agreement on the rights of that party
- Advantages and disadvantages, at the time the advice is provided of making the Agreement
- Not be terminated or set aside by the Court.
Even if, however, one or more of the above requirements are not met, the Court may still find the Agreement to be binding if it is satisfied that it would be unjust and inequitable to set the Agreement aside.
Binding Financial Agreement v Consent Orders – Which is Better?
The short answer is – it depends on your individual circumstances.
Importantly, Binding Financial Agreements are not lodged with Court – meaning that the Agreement can be confidential. You and your spouse can also agree on whatever division of property you think is appropriate, even if that agreement is not just and equitable.
As long as you have each received independent legal advice, and the Agreement is enforceable, the Agreement is binding from the time it is signed and certified. There is no appeal period.
The added benefit of a Binding Financial Agreement is that you can contract out of spouse maintenance obligations fully and finally, provided that the other party is not eligible for an income tested pension at the time of signing.
As with a Consent Order, Binding Financial Agreements also result in stamp duty being waived if a party is acquiring the other party’s interest in the family home and capital gains tax being rolled over.
Of course, there are disadvantages to signing a Binding Financial Agreement over applying for Consent Orders, including but not limited to:-
- Each party will need their own lawyer (from different law firms) and that lawyer will need to certify that they have given that party legal advice before signing the Agreement.
- Costs are generally higher than obtaining Consent Orders.
- If a party does not comply with a Binding Financial Agreement, the non-defaulting party will need to apply to the Court for a declaration that the Agreement is valid and enforceable and upon the Court declaring same, issue enforcement proceedings against the defaulting party.
Are you considering a Binding Financial Agreement?
Tags: Binding Financial Agreement, Capital Gains Tax, Consent Order, De Facto Property, Enforcement, Implementation, Limitation Period, Marriage, Matrimonial Property, Practical Tips, Property, Roll-over Relief, Separation, Stamp Duty
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