Most couples may have probably never heard of pre nuptial agreements in Australia, so they opt for a post nuptial agreement instead. What’s the difference between the two? The former is an agreement made before marriage, and the latter is made after a divorce.
These two options, though seemingly different, have the same function — to protect a person’s assets and finances.
Both prenups and postnups are legally binding in Australia if drafted correctly. So, couples don’t have to worry about their other partner getting their marital assets or finances. However, it will be up to a couple if they choose to secure them before their marriage or after divorce.
Want to ensure your assets and finances in the future? Do you need a prenuptial agreement or a postnuptial agreement? Then, let’s find out in this article.
Post Nuptial Agreements: What Is Section 90C of the Family Law About?
Under the Family Law Act, the legal term for a typical post nuptial agreement is a ‘binding financial agreement’ or a BFA. The agreement must comply with the Family Law Act 1975 so it can become legally binding in Australia.
Section 90C of the Act outlines the validity and enforceability of a post nuptial agreement. In essence, Section 90C empowers couples to create a BFA that formalises their financial arrangements in the event of separation. These are the rules under section 90C on post nuptial agreements:
- At the time of the making of the agreement, the parties to the marriage are not the spouse parties to any other binding agreement (section 90B or 90D) with respect to any of those matters (financial agreements before marriage and financial agreements after divorce order is made, respectively.)
- The agreement must express that it is made under section 90C.
- The parties to the marriage may make a financial agreement with one or more other people.
- For the avoidance of doubt, the parties may make a post nuptial agreement before or after the marriage has broken down.
- A new postnup may terminate a previous financial agreement (however made) if all of the parties to the previous agreement are parties to the new agreement.
Under the same section, the following must appear in a post nuptial agreement:
1. What steps should be taken to deal with all or any marital property or financial resources owned by one or both spouses at the time of the agreement, or at a later date and during the marriage, in the event that the marriage fails;
2. Spousal maintenance terms:
- During the marriage; or
- After divorce, or
- Both during the marriage and after divorce.
- Other concerns that are incidental to the abovementioned matters
What’s in a Post Nuptial Agreement?
So, how does this agreement protect your financial assets? Let’s look at what you can typically include in a postnuptial agreement:
- Division of Assets and Debts. This is the core element of most postnups. It outlines how the agreement will divide jointly owned property (house, car, bank accounts, etc.) and separate assets (pre-marital inheritance, etc.) upon separation. Here, you can specify percentages, specific items, or a combination of both.
- Spousal Maintenance. The agreement can address potential spousal support payments after separation. This considers factors like income disparity and the duration of the marriage.
- Inheritance Expectations. You can clarify how inheritances received during the marriage or after separation will be treated. Will they be considered separate assets or become part of the marital pool? To make sure that you’re on the right track in this aspect, contact a wills and estate lawyer for more information.
- Business Ownership and Management. If you co-own a business, the postnup can establish ownership rights and a plan for managing the business in case of divorce. This might include a buyout option or predetermined valuation methods.
- Debts and Liabilities. The agreement can specify how both parties will handle existing and future debts. So, this will include who will be responsible for specific debts, or if they be divided proportionally between the parties.
- Tax Implications. While not directly included in the agreement, it’s wise to consider the potential tax implications of dividing assets. Consulting a financial advisor alongside your lawyers is recommended.
- Dispute Resolution. The postnup can outline a dispute resolution process in case of disagreements during separation. This could involve mediation or arbitration to avoid costly court battles.
Post Nuptial Agreement: How Does It Become Binding?
Section 90G sets out specific conditions for a BFA to be enforceable. Here’s a summary of these conditions:
- Both parties must sign the agreement
- Prior to signing, each spouse must receive independent legal advice from a qualified lawyer.
- The agreement should be based on a full and frank disclosure of each party’s financial situation.
- A postnuptial agreement must include full financial disclosure from both spouses. You can read our article here about financial disclosure.
Why is independent legal advice needed? Each spouse must seek independent legal advice from a legal practitioner about the effect of postnuptial agreements. Lawyers can explain the impact of the agreement on the rights of that party and the advantages and disadvantages of making the agreement.
Along with this independent legal advice requirement are the following:
- A signed statement by the legal practitioner stating that the advice was provided to that party.
- A copy of that statement is given to the other spouse party or a legal practitioner for the other spouse party.
What if the Other Party Does Not Get Independent Legal Advice?
However, if the party does not satisfy the independent legal advice requirement during the creation of a postnup agreement, the party must comply to these conditions for the agreement to be binding:
- The parties must sign the agreement.
- A court is satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse parties to the agreement (disregarding any changes in circumstances from the time the agreement was made.
- There must be a declaration from the declaring that the agreement is binding on the parties to the agreement.
- The court did not terminate or set aside the agreement.
- Submit an enforcement application. The court may only make such an order declaring that the financial agreement is binding only upon application by a spouse party seeking to enforce the agreement.
Enforcement Application for a Post Nuptial Agreement
Another relevant provision under the Family Law Act is Section 90KA. This section talks about the validity, enforceability and effect of financial agreements and termination agreements. So, how does the court determine these factors?
To summarise, the court will:
- Determine whether it is under Section 90G requirements.
- Determine if there is fairness in the agreement, considering each party’s financial circumstances when signing and current circumstances.
- Assess the agreement as it would any other legal contract, considering factors like fairness, duress, and genuine consent;
- Grant remedies like voiding the agreement or ordering financial compensation for breaches.
- Award interest on financial obligations outlined in the agreement; or
- Enforce the agreement as a court order.
We Can Provide Independent Legal Advice Just for You!
A well-crafted postnup agreement can bring peace of mind and clarity to your marriage. While this is a hard time for most couples, our lawyers from JB Solicitors can make it easier and provide the best independent legal advice for you and your ex-spouse. Let us make sure that both you and your ex walk away fair and square with each of your marital assets and finances.
We also want to inform you that postnuptial agreements cannot cover child custody or child support issues. That is a different issue we can also cover independently, since matters for children are dealt with differently. But don’t worry! We can also help you draft the perfect parenting arrangements for ex-couples.
Contact us today to discuss your specific needs and ensure your postnup protects your future, fairly and effectively.
