Yukio Hayashi 25 May 2018
Q: There is an upcoming marriage between Australians who have an age gap of 10 years. The man has economic power, a house and some assets. As a condition of marriage, he said, “I want you to sign a contract which pre-determines the distribution of assets in the event of a divorce”. When he divorced his ex-wife, he stated he did not want to go through it again as it was not a pleasant experience. What is this document and what is its effect?
A: It is a Financial Agreement and is more commonly known as a Prenuptial Agreement under the Family Law Act as per Part VIIIA. The main purpose of the agreement is to identify how the couple will distribute their assets should they divorce. For example, if at the time of marriage, one party has a pre-existing home or an expensive piece of artwork that may have been inherited from a parent, the prenuptial agreement will state “the house or art is not marital property at the time of the divorce and is to be excluded from distribution”. The Financial Agreement not only determines the distribution of assets but also covers child support fees and alimony. However, child support is a child’s right and there is a very likely chance that a dispute will arise in relation to its validity and is generally not covered by the Financial Agreement. A Financial Agreement can be entered into not only before marriage but also during the marriage and after divorce.
Ideally, entering into a Financial Agreement will make the divorce process smoother (without having to waste unnecessary legal costs or effort).
However, one thing that should be noted is that even if the Financial Agreement was considered a fair arrangement at the time, it may be considered unfair in the future. For example, 10 years later after a child is born, if an individual had been a housewife for a long period and cannot obtain a stable job, can it be considered acceptable then? In this regard, the Family Law Act has several conditions that can revoke the Financial Agreement, including situations whereby the effects of the Financial Agreement are considered unfair.
To ensure the validity of the Financial Agreement, information will need to be disclosed which may be considered important, including the details of the assets and a certificate from each respective lawyer that shows advise has been provided to you in relation to the pros and cons of the Financial Agreement and the benefits and the rights of the parties(Section 90G(1)(b) of the Act).