In Western Australia, divorce and marriage renders a Will invalid, unless the Will includes an express statement that it is made in contemplation of such an event occurring. At Fort Knox Legal, we often receive instructions from clients to update their Wills and estate planning documents following the breakdown of a marriage, or in contemplation of a marriage.
Having a valid Will is an important estate planning tool to ensure that your wishes are carried out. However, the Will will only take effect once you have died and offers no solution for separating parties during their lifetime. The use of a Binding Financial Agreement can offer a solution for the distribution of assets during a person's lifetime and after the breakdown of their relationship.
Binding Financial Agreement
A Binding Financial Agreement is a private agreement between couples that sets out how their assets and liabilities will be divided following the breakdown of their relationship and prevents either party from invoking the jurisdiction of the Family Court.
A Binding Financial Agreement can be entered into before, during, or after a relationship and applies to both de facto and married couples. The agreement offers a degree of certainty as to what will happen in the event of separation or divorce, as well as reducing the financial stress of separation. It also allows the parties to end the relationship without the need for costly and time-consuming Family Court proceedings.
The Family Law Act 1975 sets out strict requirements which must be met to ensure that the Binding Financial Agreement is binding. These include that each party receive independent legal advice about the binding nature and effect of the agreement to their personal circumstances, which follows with a certificate signed by the respective legal advisors setting out the advice given.
Binding Nature of a Binding Financial Agreement
A Binding Financial Agreement must satisfy the following conditions:
Further, the agreement will be binding on the parties only if:
Additionally, where there is a financial agreement dealing with how the parties' assets will be distributed after the breakdown of a marriage, it will be of no force and effect until a separation declaration is made. The said separation declaration must state that the parties have separated and there is no likelihood of cohabitation being resumed.
Termination of a Binding Financial Agreement
The Family Law Act 1975 sets out the various circumstances in which a Court may set aside a financial agreement, including:
If the agreement is set aside, the parties to the agreement may apply to the court for orders dealing with the division of the asset pool.
A Binding Financial Agreement can also be terminated by agreement between the parties, known as a termination agreement. The termination agreement must satisfy the same formal conditions as required when entering into a financial agreement.
It should be noted that a Binding Financial Agreement cannot be varied. If the parties intend to "vary" the agreement, a new agreement should be made which includes a provision to terminate the prior agreement. Parties cannot enter into a new Binding Financial Agreement if there is a prior agreement in place.
Death of a Party to a Binding Financial Agreement
The Family Law Act 1975 provides that a financial agreement will continue to operate after the death of a party, therefore binding the deceased's executor or legal personal representative. However, the financial agreement will not replace an individual's Will and there is still a need to make a Will to ensure the estate is distributed in accordance with the individual's wishes.
If you require assistance with the preparation of a Binding Financial Agreement, or need to obtain legal advice in relation to a Binding Financial Agreement provided to you, you are welcome to contact our office on (08) 9200 1833 to make an appointment to see one of our lawyers.