Pre-nups and Spouse Maintenance – what you need to know

Financial Agreements, often referred to as ‘pre-nups’ can be a cost-effective and flexible legal alternative to litigation following the breakdown of a marriage or de facto relationship. The future comes with no guarantees however, and neither do Financial Agreements, especially when it comes to maintenance provisions for the partner in the weaker financial position. Streeterlaw’s Accredited Specialist (Family Law), Simone Green, outlines important considerations and tips for future proofing your ‘pre-nup’.

Why make a Financial Agreement?

The ability to pre-determine the division of assets in the event of future separation can bring comfort to otherwise anxious partners, particularly those entering the relationship with greater assets, or following previous negative experiences with past relationships. Financial Agreements made prior to the end of a relationship, also have the benefit of being negotiated in happier, less emotional circumstances.

What about spouse maintenance?

Financial Agreements may provide for either the payment of spouse maintenance to the other party or to prevent future claims for spouse maintenance being made. There remains an element of uncertainty regarding the binding nature of these spouse maintenance provisions within Financial Agreements when made prior to separation. In some circumstances the Court can set aside the spouse maintenance provisions of a Financial Agreement where a party is suffering financial hardship and make an Order for spouse maintenance despite a previous intention that none would be paid. So, what can you do to help ensure that your Financial Agreement stands the test of time?

1.  No income tested pensions, allowances, or benefits (eg. Centrelink)

• If one party is unable to support themselves adequately without an income tested pension, allowance or benefit at the time of signing a Financial Agreement, the Court retains the power to make orders for spouse maintenance despite the Agreement (section 90F Family Law Act).
• This also applies those who may be eligible for, but not in receipt of such welfare payments.
• Entering into a Financial Agreement for spouse maintenance in such circumstances is risky.

2.  Make provisions for adequate spouse maintenance or further property adjustment on the birth of children

• A Financial Agreement may be set aside by the Court if since making the Agreement, a material change in circumstances has occurred relating to the care welfare and development of a child of the relationship, and that change will result in the carer of that child suffering hardship.
• Given the risk that a Financial Agreement may be set aside on hardship grounds, it is imperative that adequate financial provision is made within the Agreement for the party in the weaker financial position following the birth of children.
• Your family lawyer can draft clauses to help protect the validity of the Financial Agreement in the event of the birth of children.
• Alternatively, consider making the birth of children a terminating event under the Financial Agreement and negotiate a new Financial Agreement following the birth of children when the asset position may be better assessed.

3.  Ensure that full disclosure is made of each party’s financial circumstances at the time of signing the Financial Agreement.

• One of the other ways a Court can set aside a Financial Agreement is by way of fraud by non-disclosure of a significant asset.
• Ensure when negotiating a Financial Agreement that you exchange all relevant financial documents and information to verify each party’s asset position at that time to strengthen the Agreement from later challenge.

4.  Get expert legal advice from an Accredited Specialist in Family Law

• As the jurisdiction of the Court is effectively ousted by the making of a Financial Agreement, the form, drafting and execution of Financial Agreements are highly regulated, complex and best left to the Family Law experts.

If you are considering a Financial Agreement to protect your assets from your partner in the event of a breakdown of the relationship, call our specialist team at Streeterlaw today on 02 8197 0105.