Combined Defacto and ‘Pre-nup’ Pre-Marriage Financial Agreements Determined to be Valid

Talking with your partner about entering into a binding financial agreement, or a ‘pre-nup’ as they are sometimes known, is a difficult enough conversation.

Making it more difficult, the Family Law Act 1975 provides that if you are in a defacto relationship, and enter into an agreement under the defacto sections of the law, that agreement will come to an end and cease to be effective upon marriage.

Quite why this is the case has never been clear to the legal profession at large, but most lawyers have advised then that parties considering marriage with an existing agreement should re-enter a new agreement at that time.

This often doubles the cost of getting a financial agreement and both parties have to attend at lawyers again to obtain what often amounts to very similar advice.

A newly-published case (Piper & Mueller [2015] http://www.austlii.edu.au/au/cases/cth/FamCAFC/2015/241.html)  however states that a financial agreement is able to be both a defacto agreement – pursuant to s90UC of the Family Law Act – as well as a pre-marriage agreement – pursuant to s90B of the Family Law Act.

The rationale is that the agreements do not conflict with each other because the portion of the agreement that relates to being under the defacto laws ‘falls away’ when the parties marry, as a result of that same troublesome piece of the law that caused difficulty above.

This means that parties can save considerable cost, as well as time and stress, by having an agreement drafted during their defacto relationship that is put into operation with marriage.

Our lawyers would be pleased to assist you with that type of agreement and answer any questions you have about these agreements.

You can call us on 03 9614 7111 or email Melbourne@nevettford.com.au

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Why Hire a Family Lawyer?

Why Hire a Family Lawyer?

Many people balk at the idea of hiring a family lawyer for a variety of reasons, including the cost of the exercise, and the feeling that they do not want to invite a stranger into the most intimate details of their lives. The Court has made services accessible to the public at large that helps to foster peoples’ easy and cost effective access to justice including:

• All Court forms being readily accessible online, with how-to guides for popular documents
• Providing ‘duty lawyer’ services at Court so that individuals can access basic advice even on their Court date
• Providing significant accommodation, time and patience to parties who are ‘self-representing’ when they are in front of a Judge

All a lawyer seems to do to most people is to manipulate words, and if you can speak, so the logic goes, you can be your own lawyer. There are fewer people who feel the same way however about accessing other professionals, and few are game enough to do their own plumbing or service their own car, despite the arguably ‘higher stakes’ involved in a bitter family law dispute. In short, investment in a lawyer for your family law matter has a significant number of advantages:

• Getting forms and documents ‘right’ the first time
• Knowing what is going to help, and what is going to hinder you
• Knowing from an early stage what the likely range of outcomes for your matter is going to be
• Accessing expert and experienced strategic advice in relation to your matter, and with the best law firms, expert advice on how various Judges, Courts, Registrars and Registries will react to certain issues
• Having an expert who is suitably objective to provide you with ‘reality testing’ at every step of the process

Hiring a lawyer does not have to be an all-or-nothing approach either; many law firms are now offering packaged work or strategic intervention, to assist you for example with finalising documents in preparation for trial, simply appearing for you and avoiding the cost of back-and-forth in letters, or reviewing your situation early so that you can negotiate an outcome directly with your former partner. We offer these types of services and encourage you to contact us to discuss your situation today.

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The Future of the Binding Financial Agreement

'Pre-nuptial’ Binding Financial Agreements are an important tool available to the cautious and well-prepared traveller through life.

They are particularly widely-requested from parties who have already been through one hotly-contested relationship breakdown and with good reason

These parties will often appreciate what people who have not been through litigation before will not; namely that any document or record of what happened at the beginning of a relationship is an invaluable tool should a relationship end.

They also have a more acute understanding of the legal system and the difficulties they may face in actually enforcing such a document, and so lawyers can take greater comfort in their client’s appreciation of this unavoidable difficulty.

The publicity surrounding swimmer Grant Hackett’s case, and his subsequently bringing claims against his former law firms will on the other hand give even greater pause to family lawyers than many already feel. Whatever the outcome, there will be valuable learning experiences in the case, and wise family lawyers will further strengthen and hone their advice as a result.

In the grand scheme of family law in Australia, the Binding Financial Agreement remains a novel document. Family lawyers should act accordingly cautiously, but at the same time take advantage of and advise about the advantages these documents can present to clients. They may form one part of a comprehensive asset-protection strategy, particularly for clients with an interest in a business or a small business with other partners.

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Spousal Maintenance under the Family Law Act

Under the Family Law Act a Court may make such order that it considers “proper” for the provision of maintenance.  This means that the Court has a discretion both as to whether maintenance should be ordered and, if so, as to how much should be ordered.  It is a discretionary power.

Under the Act, a party to a marriage is liable to maintain another party to the extent that the first party is reasonably able to do so and the second party is unable to support him or herself adequately:

a.     Due to having care or control of a child of the marriage under the age of 18;

b.     Due to age or physical or mental incapacity for appropriate gainful employment; or

c.     For any other adequate reason.

Having regard to a list of factors, including:

1.     The age and health of the parties;

2.     Whether either party has the care or control of a child of the marriage under the age of 18;

3.     Commitments of each party necessary to support him or herself and a child that the party has a duty to maintain;

4.     A standard of living that in all the circumstances is reasonable;

5.     The extent to which the party whose maintenance is under consideration has contributed to the income earning capacity, property and financial resources of the other party; and

6.     The duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration.

Case law provides that the term “adequately” is not a fixed standard.  It is not subsistence level.  An applicant is not entitled to live at a level of consideration luxury just because the other party is very wealthy.  Where possible, both spouses should continue to live after separation at the level that they previously enjoyed. 

The Court would assesses "earning capacity".  The applicant needs to provide evidence as to the attempts to find employment.  The Court may find that the applicant has earning capacity, but it may find that the applicant’s earning capacity is less than the income received.  It would then need to assess whether the applicant has the capacity to support him or herself adequately.

When a Court determines capacity to pay maintenance, it will take into account income, property and financial resources of that party.  It may be necessary to show that the income of that party does not exceed that part's reasonable expenses in order to show that there is no capacity to pay maintenance. There is no mathematical formula and the Court's power is discretionary. 

Please do not hesitate to contact your Nevett Ford representative with any questions about this article or Family law matters.

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Do I need a prenuptial agreement?

Prenuptial agreements are often mentioned when high profile couples marry or separate.

Prenuptial agreements are fairly new to Australia. They are a type of Binding Financial Agreement (BFA), which came into existence in 2010 when the Family Law Act 1975 was amended to allow parties to enter into private agreements about their property matters.

You should consider entering into a BFA with your partner if:

·         If there is a significant disparity in wealth between you and your partner.

·         If one party is expecting a large inheritance and the other one is not.

Parties can enter into a BFA in contemplation of marriage or entering into a de facto relationship, during a marriage or de facto relationship or even after separation.

In order for a BFA to be binding, both parties to the Agreement must receive independent legal advice. This means that they must each have their own lawyer. Given the complexities involved in drafting and advising on BFAs, it is essential that you consult a lawyer who specialises in Family and Relationships Law.

At Nevett Ford, we have two Accredited Specialists in Family Law, Annmarie Farrell and Elizabeth Hall.

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