Australian law permits couples to enter into binding financial agreements in anticipation that their relationship might break down

Australian law allows couples to make agreements in anticipation that their relationship might break down at some point. Different agreements can be made depending on the kind of relationship the parties contemplate or commence.

Why would you agree?

Prenuptial and cohabitation agreements can address some issues, such as how the parties will divide the housework. It is good to think about those things before you begin your relationship, but agreements concerning the division of labour are not easy to enforce in court.

Agreements concerning financial issues, on the other hand, can be made enforceable. Those agreements are usually made in contemplation of the possibility that the relationship will end.

Discussing financial issues before the relationship begins can be easier than trying to negotiate an agreement after separation when emotions might make the rational conversation more difficult.

Cohabitation agreements

Agreements made in anticipation of living together in a de facto relationship, or that are made during such a relationship are known as cohabitation agreements. Section 90UB of the Family Law Act 1975 permits parties to enter into a financial agreement if they plan to enter into a de facto relationship. Section 90UC permits partners in a de facto relationship to make a financial agreement after they have started living together.

The financial agreements governed by sections 90UB and 90UC can address:

  • how property (including financial resources) will be divided if the relationship breaks down, and
  • the responsibility of either partner to pay maintenance to the other if the relationship breaks down.

Other concerns can be addressed in the agreement, but the law gives cohabiting parties assurance that their financial agreements will be binding.

Prenuptial agreements

Agreements made in anticipation of marriage are known as prenuptial agreements. Agreements made during a marriage are usually known as financial agreements or marital agreements. Prenuptial financial agreements are permitted by section 90B of the Family Law Act. Financial agreements made during marriage are authorized by section 90C.

The financial agreements governed by sections 90B and 90C can address:

  • how property (including financial resources) will be divided if the marriage ends,
  • the responsibility of either spouse to support the other during marriage, and
  • the responsibility of either spouse to pay maintenance to the other if the marriage ends.

Other issues can be addressed in a prenuptial agreement, but the law permits financial agreements to be made binding.

Binding financial agreements

A prenuptial or cohabitation agreement will often address financial issues, including:

  • Which party will pay which bills while you are living together?
  • What will happen to the property you bring into the relationship if you separate?
  • What will happen to the property you acquired with your earnings when you separate?
  • What will happen to the property you and your spouse or partner acquire jointly when you separate?
  • What obligation will one spouse or partner have to support the other while you are living together or after you separate?

Other issues can be addressed in cohabitation or prenuptial agreement, but Australian law expressly provides that a financial agreement can be made binding if appropriate procedures are followed.

The most important procedure requires each party to have a lawyer review the agreement so that the party understands it and agrees that it is fair. Both parties must obtain legal advice before a financial agreement will be recognized as binding.

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