A good friend of Farrar Gesini Dunn, Stephen Bourke of SuperSplitting, was quoted in John Wasilev’s ‘Your Questions’ section of the Financial Review last weekend. Read the full article below:
Financial Agreements made when combining super funds with a new spouse require careful preparation to be binding, writes John Wasilev.
I’m about to remarry. I have my own do-it-yourself super fund and my new partner and I have discuss combining our super into my fund. I recently saw your question that mentioned binding financial agreements that identify super investments of a couple. This was interesting as someone mentioned such an agreement to me. How secure is a binding financial agreement and how should this be recorded on an ongoing basis?
If you and your new spouse want to combine your superannuation in your self managed super fund, says lawyer Stephen Bourke of SuperSplitting, a Canberra firm that specializes in giving advice on such strategies, the first thing to be aware of is that your spouse must take a seat at the trustee table and become a director of the corporate trustee.
They should therefore be aware of the responsibilities that come with these new roles including signing a declaration that sets down in quite a lot of detail what is expected of a trustee. If you want to use a financial agreement when you combine your super, then this will set the rules between the two of you about what to do with your super (and other property) if the relationship does not last.
Where a couple sets such rules and a problem arises in the future, the Family Court does not get to decide what the financial division will be. The financial division between the separating couple will be done in accordance with the financial agreement. There are some other points to consider.
Technically, all agreements made under the Family Law Act are financial agreements. The question of whether the financial agreement is binding will depend on how it was made. They are highly technical documents and require each member of the couple to be independently advise by an Australian legal practitioner. So don’t use an overseas lawyer as one couple did, only to find the financial agreement was not binding.
So to answer the question, they are as secure as the care taken in their preparation. If an agreement is done properly it is binding. If it is not done properly it is not binding. One practical bit of advice, Bourke says, is to avoid signing the agreement on the eve of the wedding. There is too much pressure, too many other things to do and it is too easy for mistakes to be made. If it strains the relationship it might also become the reason for the cancellation of the wedding!