A good family lawyer’s knowledge and experience is in some ways similar to that of a tradies toolbox. There are array of tools available to a family lawyer that may do the job, but there is likely to be a tool best suited to achieve the desired outcome.
Binding Financial Agreements certainly fit into this category. As a tool to settle post separation property, it can be the best available tool in some situations, but in many situations Consent Orders tend to be a much better option.
There are a number of reasons for this. Consent Orders are Court sanctioned orders. They have been sealed by the Court and are difficult to challenge. The process of drafting and filing Consent Orders is relatively straight forward, not overly time-consuming in most cases, and relatively risk free to clients and lawyers.
Binding Financial Agreements on the other hand are agreements made under the Family Law Act, and require strict compliance with the Act’s requirements to be binding. If the agreement is not drafted properly, or does not comply with requirements, it will not be binding.
Some legal practices will suggest a Financial Agreement as being a less expensive and more time effective way of resolving property settlement.
Financial agreements require both parties to have a solicitor to explain, and in writing, give them advice on the terms of the Financial Agreement. Full and frank disclosure of relevant documents should also be exchanged to maximise the chances of the Financial Agreement being binding.
Although it may seem like a quick and cost effective solution, a well drafted, well considered Binding Financial Agreement accompanied by the level of advice required under the Family Law Act can be time consuming and costly. It also comes with a risk that the agreement may be challenged in the future and found not to be binding.
A fundamental difference between a Financial Agreement and Court Consent Orders is that once Orders are made be the Court they are final and binding. For a financial agreement, if a party wishes to rely on the Agreement at a later date, they must first satisfy the Court that the agreement is actually binding.
An example might be: The parties separated in 2015 and completed a Financial Agreement for property settlement. The Financial Agreement is then held by the parties and their lawyers. In 2019 one of the parties becomes dissatisfied and seeks property settlement different to the Financial Agreement. The party that wishes to rely on the Financial Agreement must then prove to the Court that the 2015 Agreement was actually binding. So it is not until 4 or more years after the agreement has been signed that a Court will determine whether the agreement is binding or not.
So when is a Binding Financial Agreement the best post separation option? It is entirely dependent on your particular circumstances. A Binding Financial Agreement may be the only available option where a limitation date has expired either 12 months after the date of divorce or two years after the end of a de facto relationship. In these situations, a Binding Financial Agreement comes with the advantage of providing a stamp duty exemption on property transfers dealt with the in the agreement.
Other circumstances where a Binding Financial Agreement may be the better post-separation option can include more complex property settlements involving business interests, or for making binding spousal maintenance arrangements.
The best way to determine whether a Binding Financial Agreement or Consent Orders are the best property settlement option in your circumstances is to seek legal advice from an experienced family lawyer before embarking on this journey. McNamara & Associates provide a 1/2 hour free initial family consultation to discuss your options and advise you of the most suitable way forward for you.