What Makes a Financial Agreement Legally Binding?

Binding Financial Agreements (often referred to as “prenups” or “post-separation agreements”) can be an effective way for couples to formalise how assets, liabilities, and financial resources will be dealt with in the future.

However, unlike many other contracts, Financial Agreements must comply with strict requirements under the Family Law Act 1975 (Cth). If these requirements are not met, the agreement may not be binding and could be challenged in Court.

The Importance of Independent Legal Advice

One of the most important requirements is that each party receives independent legal advice before signing the agreement.

The advice must cover:

• The effect of the agreement on that person’s legal rights; and
• The advantages and disadvantages of entering into the agreement at that time.

Each party should have their own solicitor. One lawyer cannot advise both parties.

The Agreement Must Be in Writing

To be legally binding, a Financial Agreement must:

• Be in writing;
• Be signed by all parties; and
• Be accompanied by certificates confirming that independent legal advice was provided.

Verbal agreements or informal arrangements will not satisfy the requirements of the legislation.

Full Financial Disclosure Is Essential

Before signing, both parties should provide complete and accurate information about their financial circumstances.

This includes:

• Property and real estate;
• Bank accounts and investments;
• Businesses and trusts;
• Superannuation;
• Liabilities and debts.

Failing to disclose important financial information can place the agreement at risk of being set aside in the future.

Take Your Time

Financial Agreements should never be rushed. Agreements signed shortly before a wedding, separation, or major life event are often subject to closer scrutiny by the Court.

Allowing sufficient time for advice, negotiation, and consideration can help reduce the risk of future challenges.

Conclusion

A Financial Agreement can provide certainty and protect assets, but only if it is properly prepared and executed. Obtaining experienced legal advice from the outset is the best way to ensure the agreement achieves its intended purpose and remains enforceable in the future.

If you are considering a Financial Agreement, the Family Law team at Solari & Stock can provide practical advice tailored to your circumstances. You can reach us on 8525 2700 or click here to request an appointment.