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pre nup

Would you sign a prenup if your fiance threatened to cancel the wedding?

Binding Financial Agreements (BFA’s) or prenups as they are commonly known are meant to be voluntary, and each party must enter into the agreement of their own free will, and not because they have been pressured into it by the other party.  The High Court will consider the issue of “duress” in the matter of Kennedy & Thorne [2016] FamCAFC 189 where Ms Thorne claims she was forced to sign the binding financial agreement — because her husband-to-be, “Mr Kennedy”, said he would cancel the wedding if she refused.  Her legal team argues that this meant she was “under duress”, and that the agreement should therefore be declared void by the court.

Mr Kennedy was a divorced, 67-year-old property developer worth between $18 million and $24 million, while Ms Thorne was half his age with no assets.   They met on a dating site and he organised to fly to her home country in the Middle East to meet in person, promising to marry her if they hit it off.  After a four-year marriage, she is contesting a BFA she signed on the eve of the wedding, which left her with just $50,000 of his fortune and she is now seeking a bigger slice of his wealth.

The High Court will examine the question of whether threatening to “cancel the caterers” amounted to “unlawful duress”.  Mr Kennedy has passed away while the trial was part heard and the case will be carried on by the husband’s estate.  The estate, it seems will counter that Ms Thorne willingly signed the agreement after obtaining independent legal advice, and was not concerned at the time about the amount of money she would be left with if the marriage ended. 

The High Court is due to hear the appeal on 8 August and will need to clarify issues around duress, undue influence and unconscionable conduct.

If your married, intending to marry, in a de-facto relationship, have assets or have been gifted an inheritance then it could be time to think about a BFA.  However please ensure that if you are considering if you want to have a BFA, don’t leave it until the day or two before the wedding, and don’t threaten to call the whole thing off if your beloved doesn’t sign. 

Risks in delaying property settlements

Risks in delaying property settlements

Parents, children and or family members who have endured or witnessed a relationship breakdown can certainly attest to the challenges and intimidation separated parties face as a result. Not only are they emotionally challenging, they involve life-changing and confronting decisions, particularly adjusting to the severance of any financial ties and or resolving care arrangements for the children.

It is not uncommon to come across clients who have separated and left finalising their property settlement for many years. Empathetically and understandably so, property negotiation with a former partner is probably the last detail on the minds of separated parties, given the need to also address emotional issues resulting from separation – however it is imperative that you know the considerable risks associated when discussions surrounding a family law property settlement are left for a significant period.

It is important to be aware of the time limits under the Family Law Act 1975 in bringing proceedings for property settlement or spousal maintenance before the Court, which is designed to promote property settlements within a practical time frame.

  • For married couples, you have 12 months from the date of divorce;
  • For de facto couples, you have two years from the date of separation.

For married couples, we do not recommend applying for divorce until property settlement has been finalised or proceedings commenced seeking property orders. For de facto couples, we commonly run in to the issue of being out of time and we see parties expending legal costs to argue the exact date of separation – therefore reiterating the importance of finalising your property settlement at the first available opportunity following separation.

These time frames exist under the Act to provide certainty to both parties and is beneficial in cases where one party is deliberately skirting the negotiation process (usually the party required to pay maintenance or the party who has smaller future needs) and delaying a property settlement.

In the event you wish to pursue a property or maintenance claim outside the designated time frame, you can only do so with the Court’s permission, that is, leave must be sought from the Court to begin proceedings. The Court must be satisfied that hardship will be caused to you or a child if leave was not granted. In maintenance proceedings, you must demonstrate that at the time the ordinary time limit expired, you were unable to support yourself without an income tested pension, allowance of benefit.

Another significant risk associated in delaying a property settlement is that values of assets, liabilities and or superannuation, as well as the parties’ financial circumstances may change between the date of separation and when negotiations begin and or the matter is brought before the Court –the law looks at and considers the asset pool at the time of any trial, not at the date of separation. This means that any lottery wins or inheritances accumulated may be included as part of the asset pool for division. Similarly, delaying a property settlement whilst meanwhile disposing of any matrimonial assets prior to a settlement can be treated by the Court as that the person has already received part of their property settlement entitlement, thereby reducing their entitlement in the final settlement.

When property settlements are left for a significant period, this also increases the risk that one party may die before proceedings are initiated. Any property owned as joint tenants such as the matrimonial home will be transferred automatically to the surviving tenant (usually the ex-spouse), regardless of what the deceased’s Will states and regardless of whether the parties have separated.

It is for these complexities and risks involved in determining the parties’ entitlements after a long period of separation that we advise you to speak to one of our experienced family lawyers post-separation. Or, if you are in a position where the ordinary time limit has lapsed, we can tailor our advice to you accordingly taking into account your circumstances.

On the same note, if you have managed to reach an agreement with your former partner about a property settlement, we encourage you to document it in a legally binding and recognised manner, either through Consent Orders or a Binding Financial Agreement. The risks you face otherwise is that your partner later decides to change the agreement, which was never formalised in the first place. Putting the terms of settlement in a legally enforceable way would save considerable amount of time and costs in the future if the “informal” agreement was challenged.

Please do not hesitate to contact us on 03 9614 7111 or email us out of hours on melbourne@nevettford.com.au.

Binding Financial Agreements (BFA)

Parties can enter into a BFA before marriage (s 90B), during the marriage (s 90c), after a divorce (s 90D), before entering into a de facto relationship (s 90UB), during a de facto relationship (S 90UC) or after the breakdown of a de facto relationship (s 90 UD). Both heterosexual and same-sex (LGBT) couples can enter into a BFA.

A Binding Financial Agreement (or BFA) is a written document signed by both parties to a relationship which contains provisions about the division of property in the event of a separation. It must comply with either Part VIIIA or Part VIIIAB of the Family Law Act 1975 and parties to the Agreement must obtain independent legal advice about the Agreement.

A Binding Financial Agreement is often referred to as Prenuptial Agreement (prenup or prenups), Cohabitation Agreement, Postnuptial Agreement (postnup or postnups), Property Settlement Agreement or Divorce Settlement Agreement.

Binding Financial Agreements entered into prior to or during a Marriage or De Facto Relationship

Advantages

  1. It allows parties to protect assets and financial resources which existed prior to the relationship from a claim for division after separation.
  2. It allows parties to protect an inheritance or gift they received prior to the relationship, during the relationship or after separation.
  3. In some circumstances, it allows parties to remove their respective responsibilities towards the other to provide spousal maintenance.
  4. It provides a degree of certainty to the parties as to how their assets, financial resources and liabilities will be treated in the event they separate and remove any anxieties they may have about entering into a relationship in the first place.
  5. It allows parties to be clear about the responsibility of debts such as credit card debts, home loan, personal loans, business loans, etc.
  6. In conjunction with a will, it allows parties to plan their estate and ensure that their children, especially any children from previous relationships, are not disadvantaged in the division of the estate.
  7. It allows parties to determine their property settlement without the intervention of the Courts and costly legal disputes.

Examples of when a Binding Financial Agreement may be useful

  1. When one party has significantly more assets and financial resources than the other, a BFA (whether entered into before or during the relationship) allows that party to keep those assets and financial resources safe from the other in the event that they separate.
  2. When both parties have significant assets and financial resources and they both wish to quarantine those assets and financial resources from the other in the event that they separate.
  3. When one or both parties have children from previous relationships and wish to protect all or part of their assets and financial resources for their children.

Binding Financial Agreements entered into after separation

Advantages

  1. It allows parties to keep the terms of their settlement agreement away from the eyes of the Courts, the Australian Taxation Office (ATO) and other persons and organizations.
  2. It allows the parties more flexibility in how they wish to determine their financial matters.
  3. In some circumstances, it allows parties to remove their respective responsibilities towards the other to provide spousal maintenance.

Examples of when a Binding Financial Agreement may be useful

  1. When parties have complex property, business or trust arrangements which they wish to keep as private as possible.
  2. When the settlement terms are more in favour of one party and as a result may not be approved by a Court.
  3. When the parties need a quick resolution to their financial affairs and wish to avoid an agreement which requires the review and approval of a Court (consent orders).

We have a competent and approachable team of family lawyers who is able to assist you in determining the right kind of Binding Financial Agreement for your circumstances. We recommend you contact us on 03 9614 7111, or email us out of hours on melbourne@nevettford.com.au.

Protect Your Family’s Investment

Many people choose to invest in property in Australia for their retirement, as a source of income, or to assist their children with somewhere to live. This is true of both local buyers and overseas purchasers. When you do this however, you should turn your mind to how Australian family law will consider this type property in the event that there is a separation involving yourself or your children in the future.

If a parent buys a property for their child, their child marries and then divorces, it is not as simple for the parents as getting their money back out of the property ‘dollar for dollar’. Australian family law will usually consider this assistance from a parent a type of financial contribution, not a loan, and is not inclined to repay the money as if it were a normal debt. Often people will walk away from a relationship having lost not only a lot of money themselves, but also a lot of their family’s money, resulting in increased family tension.

At Nevett Ford Lawyers, our large and experienced team advise and assist with a range of solutions to help to protect you and your family in these situations. When you purchase a property, we recommend considering a Binding Financial Agreement under the Family Law Act to protect yourself and your children, as well as ensuring loan documents are drafted to assist in recovering money if necessary. We are also able to draft Inheritance Agreements to help to protect inheritances from family law disputes in the future. We can even draft Agreements that will operate for couples who are not yet married but may do so in the future and want to make just one document to cover these different situations.

It is important to look at these types of documents and have them prepared when everything is going well, to protect you in the event of future uncertainty. Determining the right kind of document for your circumstances is a skill at which our lawyers excel, and we recommend you contact us to enable you to make this important decision in an informed manner. Our number is 03 9614 7111, or email us out of hours on melbourne@nevettford.com.au