Creating a binding financial agreement requires careful consideration of which assets to include. Without a comprehensive asset list, you might face complications should your relationship end. Seeking BFA legal advice early helps ensure your financial agreement covers all necessary elements. This guide explains which assets to include in a binding financial agreement in Australia and why clear asset lists matter for married and de facto couples alike.
Key Takeaways
- A comprehensive financial agreement should include all asset categories from real property to digital assets and contingent interests
- Proper valuation timing and methods are critical to creating an enforceable agreement
- Full and frank disclosure of all assets is legally required and non-disclosure can invalidate your agreement
- Specific asset schedules with precise details strengthen your agreement’s enforceability
- Regular reviews and updates are necessary as your financial situation changes
What is a Financial Agreement in Australia?
Legal Basis and Types
Financial agreements in Australia are governed by Part VIIIA of the Family Law Act. They come in several forms: pre-nuptial (before marriage), during-marriage agreements, post-separation agreements, and similar arrangements for de facto relationships. Each type serves the same core purpose – establishing how assets will be divided if the relationship ends.
Who Can Use One
These agreements are available to married couples, de facto couples (including same-sex couples), and those planning to enter either type of relationship. The Family Law Act amendments in 2009 extended coverage to same-sex de facto relationships, ensuring equal protection under the law.
What an Agreement Can and Cannot Decide
Financial agreements can address property division and spousal maintenance arrangements. However, they cannot contract out of child support obligations, which remain governed by the Child Support (Assessment) Act regardless of what your agreement states.
Core Asset Categories to Include
Real Property
All real estate interests should be itemized, including:
- Principal residence (family home)
- Investment properties
- Holiday homes
- Overseas real estate holdings
- Land (developed and undeveloped)
Cash and Bank Accounts
Document all cash holdings and accounts, including joint and sole accounts, term deposits, savings accounts, and foreign currency holdings. Be specific with account numbers and financial institutions.
Superannuation
Superannuation is often one of the largest assets in Australian households. Include all accumulation accounts, defined benefit funds, and self-managed superannuation funds (SMSFs). Remember that superannuation splitting requires specific clauses to be effective.
Business Interests and Shareholdings
List all interests in private companies, family businesses, partnerships, and share portfolios. Include percentage ownership, estimated valuations, and any special voting rights or restrictions on transfers.
“The most contested assets in financial agreement disputes are often business interests where proper valuation methods weren’t used at the outset.” – Stewart Family Law
Trusts and Beneficiary Rights
Document all connections to trusts, whether as trustee, appointor, or beneficiary. Include discretionary trusts, unit trusts, and clearly distinguish between trustee control powers and beneficial interests.
Personal Property and Valuables
Include high-value personal items such as:
Vehicles, boats, aircraft, jewelry, art collections, antiques, collectibles, and other valuables. For items of significant value, consider attaching professional valuations.
Intellectual Property and Digital Assets
Document patents, trademarks, copyrights, domain names, and cryptocurrency holdings. These assets are frequently overlooked but can hold substantial value.
Insurance and Death Benefits
Include life insurance policies, binding death benefit nominations, and employer death benefits. Specify who remains the beneficiary post-separation.
Inheritances and Gifts
Document inheritances already received and expected future inheritances. Address how gifts from family members will be treated, particularly those with conditions attached.
Liabilities and Debts
List all debts including mortgages, personal loans, credit cards, tax liabilities, and guarantees provided for others. Specify who bears responsibility for each debt post-separation.
Contingent and Pending Assets
Include assets that may materialize in future, such as pending settlements, ongoing litigation, compensation claims, and long-term incentive plans from employers.
Valuation and Timing
Valuation Methods by Asset Class
Different assets require different valuation approaches. Real property typically needs market valuations, businesses require goodwill calculations, and superannuation may need actuarial assessment. Document which method applies to each asset.
Date of Valuation and Revisits
Specify when valuations were performed and circumstances that will trigger revaluation. Consider including mechanisms for updated valuations at regular intervals or upon significant events.
Expert Reports and Who Pays
Detail which professional valuations are needed, who provides them, and who bears the cost. This helps avoid disputes about valuation quality later.
Disclosure and Legal Risks
Full and Frank Disclosure Requirements
Australian law requires complete disclosure of all assets when creating a financial agreement. Document what materials were exchanged and attach key financial statements as schedules to the agreement.
Consequences of Non-Disclosure
Failure to disclose assets can render an agreement invalid. Courts may set aside agreements where assets were deliberately hidden or misrepresented. Document the disclosure process carefully to protect against future challenges.
Grounds for Challenge
Beyond non-disclosure, agreements can be challenged on grounds of undue influence, unconscionable conduct, or lack of independent legal advice. Ensure your agreement addresses these risks through proper process and documentation.
Drafting Practical Points
Use Precise Asset Definitions and Schedules
Create detailed schedules with specific identifiers for each asset – account numbers, property addresses, share certificate details, and vehicle registrations. The more precise, the less room for dispute later.
Allocation Mechanics
Clearly outline how assets will be divided – fixed transfers, percentage splits, or offset arrangements. Address timing of transfers and who bears transfer costs and taxes.
Treatment of Future Changes
Include provisions for handling increases in asset values, newly acquired assets, and major life events like children, inheritances, or career changes.
Dealing with Trusts and Companies
Specify how trust and company interests will be handled, distinguishing between control rights and economic benefits. Address what happens if one party remains a beneficiary but loses control.
Tax and Stamp Duty Considerations
Document potential tax implications of asset transfers, including capital gains tax events and stamp duty liabilities. Specify who bears these costs and how they impact the overall asset division.
Common Pitfalls and How to Avoid Them
Missing Trust Interests and Off-Balance Assets
Review all potential beneficial interests in family structures. Look beyond legal ownership to beneficial entitlements that might not appear on standard financial statements.
Failing to Address Business Control Versus Value
Distinguish between the economic value of a business and operational control. Sometimes parties value ongoing management rights more than the underlying financial value.
Not Updating the Agreement After Major Events
Build in review triggers for births, inheritances, business sales, and relocations. An outdated agreement may not reflect current circumstances or intentions.
Quick Checklist for Your Agreement
Documents to Gather
Collect title deeds, bank statements, superannuation statements, trust deeds, company records, tax returns, loan documents, and professional valuations. The more comprehensive your documentation, the stronger your agreement.
Questions to Answer Before Drafting
Determine which assets are separate, which are shared, and your preferred division method. Consider how future assets will be treated and what review mechanisms you want to include.
Final Review Items
Ensure you have independent legal advice certificates, signed schedules, and current valuations. Review the agreement for internal consistency and clarity of terms.
Conclusion
A well-constructed financial agreement provides clarity and protection for both parties. By properly identifying and documenting all relevant assets, you create certainty about financial arrangements should your relationship end. This reduces the potential for costly disputes and allows for a smoother separation process if needed. For personalized guidance on creating a binding financial agreement that addresses your specific asset situation, contact Stewart Family Law to arrange a consultation with an experienced family lawyer.
