When good intentions to marry becomes a complex issue for de facto couples

It has been widely believed that a Financial Agreement could not be made under more than one section of the Act.

Therefore couples who were living in a de facto relationship (s 90UC) and who planned to marry (s 90B) could not satisfy both sections of the Act in one agreement. Their only choice was to either make two agreements (doubling the cost) or change their agreement as circumstances changed.

Before we explain how things have changed and why, let’s back up a step and explain the role of financial agreements specifically in relation to de facto couples.

Understanding De Facto Financial Agreements

In Australia, a de facto relationship is defined by Section 4AA of the Family Law Act 1975. It involves two people living together on a genuine domestic basis who are not married to each other. This relationship can be between individuals of the same or different sexes.

Part VIIIAB of Australia’s Family Law Act 1975 deals with financial agreements between de facto couples. As stated above, de facto couples can enter into Binding Financial Agreements (BFAs) under sections 90UB (made in contemplation of entering into a de facto relationship) or 90UC (for couples in a de facto relationship). These agreements outline the financial arrangements between the parties should the relationship end. For these agreements to come into effect, a separation declaration under section 90UF must be signed by at least one partner.

These agreements are comprehensive and serve as a safeguard to ensure that both parties are clear on the financial outcomes if their relationship ends. However, it’s important to note that these agreements are inherently tied to the status of the relationship as de facto partners.

When de facto couples decide to take their relationship to the next level and get married, it’s crucial to understand the implications this shift has on their existing financial agreements.

Binding financial agreements made under sections 90UB or 90UC are designed to address How your assets and liabilities will be divided should the relationship end. However, these agreements do not automatically carry over into a marriage. This article will delve into why these agreements cease to be enforceable upon marriage and what steps couples can take to ensure their financial arrangements remain valid.

The Impact of Marriage on De Facto Agreements

According to section 90UJ of the FLA, once a de facto couple gets married, their financial agreement under sections 90UB or 90UC ceases to be binding or have effect. This is because the law views the relationship as having moved to a new legal status that requires different considerations and potentially new agreements. The rationale behind this is to ensure that the legal framework governing the couple’s financial arrangements is appropriate for their new status as married partners.

Transitioning to a Marriage Financial Agreement

Usually, upon marriage, the couple must enter into a new financial agreement under Part VIIIA of the Family Law Act, which deals with financial agreements between married couples. These agreements can be made:

1. Before the marriage (section 90B) – Commonly known as a prenuptial agreement, this document outlines the division of assets and finances should the marriage end in separation or divorce. It’s worth noting that such an agreement has no effect unless the marriage actually takes place.
2. During the marriage (section 90C) – Known as a postnuptial agreement, this is created after the marriage has begun and serves the same purpose as a prenuptial agreement, outlining the financial arrangements in the event of a separation.

Legal Requirements and Considerations

One crucial aspect of making these agreements effective is the requirement for independent legal advice. Both parties must receive independent legal advice before signing the agreement to ensure they understand the terms and implications. This advice is vital in making the agreement legally binding and enforceable in court.

Combining two sections of the act in one agreement

Many customers wonder if it’s possible to create an agreement that covers both de facto and marriage provisions simultaneously. The answer is yes, and the case of Piper & Mueller [2015] offers valuable insight into this matter.

The law has tested this concept!

The case of Piper and Mueller [2015] featured a dispute between a de facto couple who had a BFA which was made under both the de facto and marriage provisions (s90UC and s90B).

It was intended that the agreement would cover the couple both whilst in a de facto relationship and also when they married. The couple did not marry and the relationship broke down, resulting in a challenge to the validity of the BFA, on the grounds that two provisions cannot operate at the same time.

The Court held that the BFA was valid, as the de facto provisions were only operative when they were in a de facto relationship and would no longer apply when the couple married. The marriage provisions would come into operation only once they married. This means that the agreement can be binding, as only one provision will be operative at a time. Section 90UC will apply for the time when the couple are in a de facto relationship, being extinguished when the parties marry and causing section 90B to operate.

By combining both types of provisions into one agreement, couples can ensure continuous financial protection regardless of whether they marry or not. This approach offers flexibility and security, adapting to the evolving nature of their relationship.

So what does this mean for me?

It means that de facto couples are permitted to make an agreement under both de facto and marriage provisions of the Family Law Act. This BFA will cover them for their current de facto relationship and if they decide to marry at a later stage. This is because only one provision operates when the parties are in a de facto relationship, and the other will operate when the parties marry.

This is valuable information for couples who wish to be clear about their finances in the event of a breakdown of a de facto relationship and also a marriage.

Key Points to Consider

• Before entering into a BFA, it is important to seek legal advice. In fact, it is a requirement for each party to receive independent financial advice, evidenced by a certificate, before signing the agreement.
• Drafting one BFA covering both circumstances (de facto partnerships and marriage) is efficient as it removes duplication of time and costs.
• A financial arrangement under s 90B and s 90UC can exist in the same document as only one operates at a time. However, no current ruling exists for combinations of other provisions.

More Information

Click here to learn more about a Combined De Facto Agreement