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Binding financial agreements or prenuptials

Information about making an agreement about the way property should be divided if a couple separate.

A financial agreement is an agreement made between one or more people. It can be made when people are planning to marry (sometimes called prenuptials), during the marriage or after divorce. They can also be made by people in de facto or planning to begin a relationship.

The kinds of matters that can be included in the agreement depend on at what point in the marriage the agreement was made.

A person cannot make an agreement if they have an existing agreement made with another person.

See ss. 90B, 90C, 90D—Family Law Act 1975 (Cth)(opens in a new window).

Financial agreements for de facto couples

A de facto couple may make a financial agreement when their relationship ends, or before or during their relationship. These financial agreements are essentially the same as for married couples, but are dealt with in a separate part of the Family Law Act. It is important to note that these agreement ceases to be binding if the couple decide to marry at a later state.

See Part VlllAB, Division 4, 90UJ(3)—Family Law Act 1975 (Cth)(opens in a new window).

Agreements made before or during marriage or de facto relationship

Prenuptial agreements and financial agreements made during a marriage may include agreements about:

  • how some or all of the property or financial resources of either or both spouses are to be dealt with
  • how maintenance of either of the spouses will be dealt with during the marriage (or de facto) and/or after divorce.

The agreement may also contain matters that are incidental to or connected with these issues. These incidental or connected matters have no effect until the marriage breaks down.

See ss. 90B, 90C, 90DB, 90UB 90UC, 90UD—Family Law Act 1975 (Cth)(opens in a new window).

Agreements made after separation or divorce

Financial agreements made after a divorce order is made (or after a de facto couple have separated) may include agreement about:

  • how some or all of the property or financial resources that either or both spouses are to be dealt with
  • how maintenance of either of the spouses will be dealt with during the marriage (de facto relationship) and/or after divorce (relationship breakdown).

The agreement may also contain matters that are incidental to or connected with these issues. These incidental or connected matters have no effect until the marriage (or de facto relationship) breaks down.

See ss. 90D, 90UD—Family Law Act 1975 (Cth)(opens in a new window).

Maintenance or payments for a child

Any part of a financial agreement that deals with maintenance of a person or payments for a child will be void unless it specifies:

  • who the payments are to be made to, and
  • how much, or what proportion of the property is to be paid out to the person/s.

See ss. 90E, 90UH—Family Law Act 1975 (Cth)(opens in a new window).

Ending a financial agreement

A new financial agreement that is properly made will terminate a former agreement but only if the new agreement includes all of the parties that made the former agreement.

The agreement can only be terminated if:

  • a new agreement is made between the parties that agrees to terminate the agreement, or
  • a written termination agreement is made by the parties.

These new agreements must also be either signed after getting legal advice (with evidence that this has been given) unless a court decides to make an order stating that the order is binding. (See When financial orders are binding).

See ss. 90B(4), 90C(4),90D(4), 90J, 90UL—Family Law Act 1975 (Cth)(opens in a new window).

If one party dies

The financial agreements continue to operate even if one of the parties to the agreement dies. If this is the case, the agreement will be binding on the legal personal representative of that party.

See ss. 90H, 90UK—Family Law Act 1975 (Cth)(opens in a new window).

Separation declaration

A separation declaration needs to be made before any part of a financial agreement dealing with finances relating to the breakdown of a marriage or de facto relationship can apply. This declaration can be made by one or both parties. It must state that the parties have separated at the time of the declaration, and that there is no likelihood of them getting back together.

An exception to this is if the parties divorce or one of them dies.

See ss. 90DA, 90UF—Family Law Act 1975 (Cth)(opens in a new window).

When financial orders are binding

Financial orders will only be binding if:

  • the agreement is signed by all parties
  • before signing the agreement each party gets independent legal advice about the effect of the agreement,
  • each spouse is provided with a signed statement from the lawyer stating that this advice was given
  • a copy of this statement was given to the other party, and
  • the agreement has not been terminated or set aside by a court.

See s. 90G—Family Law Act 1975 (Cth)(opens in a new window).

If one of the parties did not get independent legal advice, the agreement can still be binding if a court is satisfied that it would be unjust and unfair if the agreement were not binding on the parties. Under these circumstances, the court can make an order declaring that the agreement is binding.

A 2012 Family Court Full Court hearing found that a court can look behind the agreement to make sure that independent legal advice was actually given.

See ss. 90G, 90UJ—Family Law Act 1975 (Cth)(opens in a new window) and Parker & Parker [2012] FamCAFC 33 (7 March 2012)(opens in a new window).

Court may make contrary orders

These financial agreements may not be followed by a court. Although designed to exclude the courts, there are some circumstances where courts will set aside the agreements and make different orders, particularly if the agreement was entered into fraudulently, or if the agreement was unconscionable. The court may make other orders if satisfied that the agreement, if followed, would mean that one of the parties would be unable to support themselves without an income tested pension.

See ss. 90F, 90UI—Family Law Act 1975 (Cth)(opens in a new window).

Court may set aside a financial agreement

The court may make an order setting aside an agreement if satisfied that:

  • the agreement was obtained by fraud
  • the agreement was entered into to defraud or defeat a creditor (or with reckless disregard for a creditor)
  • one agreement party entered into the agreement to defraud another person who is a de facto with the spouse who is party to the agreement
  • the agreement was void or unenforceable
  • circumstances have arisen that make it impractical for the agreement to be carried out
  • since making the agreement there has been a change in circumstances which would result in a child suffering hardship
  • a party to the agreement has behaved unconscionably
  • a payment flag is operating (Part VIIIB) on a superannuation interest and there is no reasonable likelihood that the operation of the flag will be terminated, or
  • the agreement covers at least one superannuation agreement that cannot be split.

See ss. 90K, 90KA, 90UM—Family Law Act 1975 (Cth)(opens in a new window).

If parties want more certainty or finality

Parties who want a formal agreement to be made after separating, may consider getting consent orders instead of binding agreements. These give the parties more certainty that the financial agreement is final.

See Consent orders.

More information

Legislation

Family Law Act 1975 (Cth)

  • s. 90B—financial agreements before marriage
  • s. 90C—financial agreements during marriage
  • s. 90D—financial agreements after divorce order is made
  • s. 90DA—need for a separation declaration
  • s. 90DB—ancillary matters have no effect until the marriage breaks down
  • s. 90E—maintenance or payment for a child
  • s. 90F—certain provisions in agreements
  • s. 90G—when financial agreements are binding
  • s. 90H—what happens if one party dies
  • s. 90J—termination of financial agreement
  • s. 90K—when the court may set aside a financial agreement
  • s. 90KA—validity, enforceability and effect of financial and termination agreements
  • Part VlllAB, Division 4—Financial agreements for de factos
    • 90UB—financial agreements before a de facto relationship
    • 90UC—financial agreements during a de facto relationship
    • 90UD—financial agreements after breakdown of a de facto relationship
    • s. 90UF—need for a separation declaration for certain provisions of financial agreement to take effect
    • s. 90UF—whether and when certain other provisions of financial agreements take effect
    • s. 90UG—where the agreement includes provisions for maintenance of a party or a child
    • s. 90UI—when court can set aside a financial agreement
    • s. 90UJ—when financial agreements are binding
    • s. 90UK—what happens if one party dies
    • s. 90UL—how a financial agreement can be terminated
    • s. 90UM—circumstances where a financial agreement can be set aside
    • s. 90UN—validity, enforceability and effect of financial and termination agreements.

See Family Law Act 1975 (Cth)(opens in a new window).

Case

Parker & Parker [2012] FamCAFC 33 (7 March 2012)

This agreement had been amended by the husband and the changes initialled by the wife. It was not clear that the wife had been given legal advice about the amendments that she was signing.

This case confirmed that a court can look behind the statement of independent legal advice to make a finding that a financial agreement is not binding even though the requirements set out in 90G have been met.

In this case it was held that the wife's lawyer did not give independent legal advice about the advantages and disadvantages of entering into the agreement.

See Parker & Parker [2012] FamCAFC 33 (7 March 2012)(opens in a new window).

Commonwealth Attorney-General guide to property settlements

The department of the attorney-general produces a guide to assist separating couples to understand their options for resolving property arrangements. The focus of this guide is to explain how to make consent orders.

See Chapter One Option 2—Property and financial agreements and consent orders—What you need to know(opens in a new window).

Updated