What is a post nuptial agreement under the Family Law Act 1975? You have two options to protecting your financial future in a marriage: pre-nuptial agreements (prenup) and a post nuptial agreement (postnuptial). Both of these documents are a type of legally binding financial agreement in Australia. A prenuptial agreement is usually enforced before marriage.
On the other hand, a postnuptial agreement is also known as a postnup or a post-marital agreement, is a contract created by married couples after they get married. It’s essentially a legal document that outlines how financial and marital assets and debts will be divided if the couple divorces in the future.
Under the Family Law Act, the legal term for a typical post nuptial agreement is a ‘binding financial agreement’ or BFA. Section 90C of the Act outlines the validity and enforceability of a post nuptial agreement. We will discuss this further in the following sections of this article.
Post Nuptial Agreements: What Is Section 90C of the Family Law About?
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 the 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:
- What steps should be taken to deal with all, or any marital property or financial resources owned by one or both spouse parties at the time of the agreement, or at a later date and during the marriage, in the event that the marriage fails.
- 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
Contents of a Post Nuptial Agreement
Here’s a breakdown of what you can typically include in a postnuptial agreement under the Family Law Act 1975:
- Division of Assets and Debts. This is the core element of most postnups. It outlines how jointly owned property (house, car, bank accounts, etc.) and separate assets (pre-marital inheritance, etc.) will be divided 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 in 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 existing and future debts will be handled. Who will be responsible for specific debts, or will they be divided proportionally?
- Tax Implications. While not directly included in the agreement, it’s wise to consider 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: When is it Binding? (Sec. 90G)
Section 90G sets out specific conditions for a BFA to be enforceable. Here’s a summary of these conditions:
- Written and signed. The agreement must be a written document signed by both parties.
- Independent Legal Advice and a signed statement. Prior to signing, each spouse must receive independent legal advice from a qualified lawyer.
- Disclosure and Consideration. The agreement should be based on a full and frank disclosure of each party’s financial situation.
Ensuring Validity: The Role of Independent Legal Advice in Post Nuptial Agreements
Under the Family Law Act, independent legal advice is required before signing the agreement. Thus, each spouse party must seek independent legal advice from a legal practitioner about the effect of the agreement. Particularly, its impact on the rights of that party and about the advantages and disadvantages to that party of making the agreement.
Along with this independent legal advice requirement are the following:
- 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 to a legal practitioner for the other spouse party.
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 agreement has not been terminated and has not been set aside by a court.
- Submit an enforcement application. The court may only make such 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.
THE TEST: In determining the validity, enforceability, and effect of contracts and purported contracts, as well as in proceedings pertaining to such an agreement, the court will apply applicable legal and equitable principles to determine whether a financial agreement or a termination agreement is valid, enforceable, or effective.
To summarise, the court will:
- determine whether it is in accordance with 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.
Seek Guidance for your Post Nuptial Agreement
A well-crafted postnup agreement can bring peace of mind and clarity to your marriage. However, dealing with the complex legalities and ensuring enforceability requires expert guidance from JB Solicitors’ family lawyers.
Contact us today to discuss your specific needs and ensure your postnuptial protects your future, fairly and effectively.
