De Facto Dilemmas – Part 2
Last month we wrote about de facto relationships and how a couple could know when they had entered into one. We looked at the case of Bill and Laura, a couple who began to live together on a part time basis and combine their finances. Bill and Laura discovered that they were in a de facto relationship as defined by the Family Law Act and if they were to separate they could be vulnerable to a claim in the Family Court.
Now that Bill and Laura have realised that they are in a de facto relationship, how can they find a way forward that won’t leave them feeling anxious about any future problems? They both want to keep living together and keep having joint finances but both want to protect assets that they have acquired prior to living together.
One possibility is that Bill and Laura could enter into a binding financial agreement, or a pre-nuptial agreement, as it is known colloquially. These agreements allow a couple to make an agreement about what will happen to them financially if their relationship breaks down. Since March 2009 binding financial agreements can apply to de facto relationships. You can enter into a binding financial agreement prior to commencing a relationship, during a relationship or after a relationship has already ended. There are also a number of legal requirements you need to satisfy in order for any agreement to be enforceable. The two most important are:
- Any parties to the agreement must disclose all their assets and financial resources prior to signing the agreement; and
- The parties must get formal, independent legal advice in relation to the proposed agreement and a solicitor must sign a certificate indicating that they have given the advice.
Binding financial agreements, whilst useful, are not simple documents to create and put into effect. It is very important that you receive advice from an experienced family law practioner in relation to creating and signing one.
Laura talks to her solicitor and decides that it is in her best interests to sign a binding financial agreement. She now has to talk to Bill about their situation and her desire for clarity in relation to what will happen if they separate. It takes her a few days to build up the courage. She finds it extremely difficult to approach Bill and begin a discussion predicated on the idea of their relationship failing. What if Bill thinks she doesn’t trust him? What if by asking Bill to sign a binding financial agreement she actually causes more problems in their relationship?
Laura does eventually raise the subject with Bill. During their conversation, Laura compares a binding financial agreement to an insurance policy. It is something that will hopefully never be used but if circumstances change, it can be retrieved and put to use, thereby saving them from added stress and anxiety during a separation. Much to Laura’s relief, Bill is not upset and he agrees with her idea that they should enter into a binding financial agreement as a kind of insurance policy. They have a frank discussion about their relationship, their finances and what they both want to happen in the future. They find that by talking openly about such sensitive matters they have actually strengthened their relationship, rather than creating additional difficulties.
Laura and Bill show why it is so important to consider and openly discuss the legal implications of relationship earlier rather than later. Imagine how much more difficult such a conversation would be for Bill and Laura if it had occurred at a time they were separating. It would significantly increase the stress on both parties at a time when they are already going through an emotionally draining experience. A binding financial agreement can facilitate these discussions and ensure there is clarity for the future.
For Out-of-Court Solutions contact Farrar Gesini Dunn.