Financial Agreements are still a hot topic, now more than ever. During COVID-19 we were inundated with news segments highlighting the escalating statistics relating to separations and divorces. As a result, our Family Courts are now stretched thin, resulting in extensive delays for parties looking to have their financial matters settled.
While it is easy to get swept away in the bliss of a new relationship, sometimes referred to as “the honeymoon phase”, it is important to take stock and think pragmatically about how to ensure that steps may be taken to protect your financial interests, in the event that your relationship breaks down. If you asked those who have experienced an emotionally, financially and physically draining court process if they would have welcomed a Financial Agreement, I’m confident most would happily engage in a potentially awkward conversation rather than spending money, energy and time in Court.
Financial Agreements allow people to take control over what happens with their assets, liabilities and any other financial resources (including those that may arise in the future) in the event of a separation. They can be entered into, before, during or after a relationship ends or before, during or after a marriage ends. I have differentiated between ‘relationship’ and ‘marriage’ here because depending on which category you may fall into will depend on which piece of legislation governs your Financial Agreement. In Australia, the Family Court Act 1997 (WA) allows for parties in a de-facto relationship to enter into a Financial Agreement and the Family Law Act 1975 (Cth) allows same for married parties.
Because of the complexity of Financial Agreements and uncertainty associated with possible material changes in circumstances between the drafting of the Financial Agreement and when it may need to be upheld, it is crucial that an appropriate lawyer with the expertise in this area advises you and drafts the Agreement accordingly.
All of the above is information which has previously been conveyed in one form or another in my colleagues, Gemma, Sarah and John’s articles.
Getting to the main question to be answered in this blog though, ‘is a Financial Agreement worth it and should you consider having one?
Bear with me here, but I’m going to compare a Financial Agreement to an extended service plan on a new car. Here goes….
Let’s say your sparkling new car comes with a three-year warranty. Over those three years, everything runs smoothly, the car is a dream to drive. And then, just two weeks after the warranty ends, disaster! You find yourself having to spend $7,000 on a new engine. Not only that, but you have to wait for 8 weeks for parts to arrive from overseas. So, your carless for 8 weeks, out of pocket and no doubt, stressed.
In contrast, you took that seven-year extended warranty, giving you 4 more years of trouble-free driving. Disaster strikes, so what? You rely on your warranty. You get your repairs finished, you have a courtesy car and you don’t worry about it.
I don’t seek to trivialise what is a major consideration, and of course, a potentially “interesting” conversation in any relationship. That said, the example above leads me to pose a simple question – if you can have an extended warranty and avoid wasting time, stress and money in the future, why wouldn’t you?
I suspect the answer would be cost. Understandable, but it is a false economy. The costs involved in a Financial Agreement can pale into comparison of those incurred during Court proceedings.