Will a Financial Agreement work for us?
Separating couples have the choice of settling property matters peacefully through a Financial Agreement or asking the court to decide.
They say “All is fair in Love and War”, and after a breakup it can be tempting to go into battle.
But if you’ve built a life together, accumulating assets (and debt), it is better to find a way to deal with your ex fairly and calmly.
There are a couple of options when it comes to settling property matters. You can ask the court to do it for you with all the costs (emotional and financial) involved or you can take the peaceful path to settlement by making a Financial Agreement.
How do you know if a Financial Agreement will work for you?
The answer is yes if…
- There is still a level of trust between the partners,
- You can be honest with your partner,
- You can still have a civil conversation and relationship,
- You can wish your ex well.
Trust is important when dealing with Property Settlement.
One of the provisions of the Family Law Act (or Family Court Act in Western Australia) in relation to making financial agreements is the requirement that each party receives independent Legal Advice before signing the contract.
This means both parties need to have a conversation with a lawyer about their situation and the agreement they are making.
During this chat the lawyer seeks to determine if the agreement has been made free of duress or pressure. S/he needs to determine that the individual truly agrees to the document and the lawyer is bound by Law to explain the ramifications of the agreement and the rights that the individual foregoes by signing it.
If either party tells their lawyer that they have been forced to agree to the document under duress / pressure, or the lawyer suspects that the individual is unhappy with the agreement, then the lawyer will advise the client NOT to sign the agreement.
This can come as a shock to the partner applying the pressure, who thought they were going to be able to force an unfair deal upon their ex. They may have even convinced themselves that their partners were happy because they appeared to be going along with it.
As we know, personal relationships can be fraught with all sorts of underlying dynamics and sometimes one party may pretend to be happy with the agreement because they don’t want to rock the boat.
The upshot is – don’t try to get an agreement through the system if you have not come to genuine agreement with your partner.
A Financial Agreement is not a tool of force
Whilst a financial agreement does mean you can avoid going to court – it does not give you an avenue to force your partner to agree to something that is unfair.
The Family Law Act has put the Legal Advice component in place precisely to weed out this kind of behaviour.
During the advice the lawyers not only have to discern the genuine agreement of the parties, they also have to advise the parties on the agreements fairness. If they see something in the agreement that is unfair – they will point it out because that is their job. This is why full and frank disclosure is so important.
Full and Frank Disclosure has two purposes
1. It informs the other party of the full extent and value of the assets and liabilities that make up the joint or matrimonial asset pool, and
2. It enables the lawyer properly assess and advise upon whether the Agreement is advantageous or otherwise to their client and advise them accordingly in conformity with the Family Law Act / Family Court Act.
For Example, let’s say the husband wants to keep 80% of the assets, thinking that he has been working and these are his assets – he earned them. Meanwhile his wife has been caring for their young family, and stopped working in order to do so. This arrangement is unfair and the lawyer would point this out. If this arrangement went to court it would be highly unlikely to be approved.
Hiding information is an obstacle to genuine agreement
At a basic level, hiding information about your assets and liabilities is an obstacle to genuine agreement. How can someone agree to something when they don’t have all the facts?
Another example, Party A inflated the value of their liabilities in this case, by including a loan that was provided to them by a family member. By doing this they were able to fudge the numbers and lower the payout to Party B substantially.
When Party B consulted with their lawyer, they told the lawyer that this loan was bogus, that in fact, Party A would never have to repay it. Party B was advised not to sign the agreement, and did not sign the agreement.
If you don’t trust your partner, or you intend trick them or force them into signing against their will, or you just can’t seem to reach genuine agreement then a financial agreement is not for you.
We are just citing a few examples as a warning and these are rare cases – most couples use our service because they genuinely want to settle property matters peacefully. For those couples it all works beautifully and they sort it out and move on with a minimum of fuss and cost.