The importance of due diligence before drafting a bfa / pre-nuptial

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In my view, it is becoming increasingly more important for parties to seriously consider entering into a Financial Agreement that is binding (colloquially called a pre-nuptial agreement) before entering second or third relationships. The reason for this is the ongoing uncertainty with the Family Court system and the current substantial delays and costs that are occasioned upon parties.

Couples need to take a sensible business approach to their relationships. They need to look at the reality that despite their best intentions, there is always a risk a relationship will fail. If it fails now, compared to a relationship that failed 30 or 40 years ago, the costs are so much higher.

In my view, we currently have a Full Court that delivers outcomes that are often difficult to understand. There are outcomes that will generally be unacceptable to many members of the community. There are outcomes, dished out every day, that allow spouses to share substantially in another spouse’s inheritance, for example, and / or to share substantially in gifts of property, land and other things that are provided to the other spouse before, during or after a relationship ends.

Relationships are changing – people still want the same things in a relationship but are more business savvy nowadays. The law has not kept up.

In my view, entering into a second or third relationship requires a very important consideration from both parties as to what they should do and what they should put in place to lessen any future dispute should they separate.

We have a lot of enquiries about Financial Agreements and often people think they are too expensive, and the cost is too high. I will say a bit more about this in later editions of our newsletter, but it is important to understand that a good Financial Agreement does not just involve the drafting but also involves due diligence undertaken before entering into it.

That is, before parties enter into a Financial Agreement, a good family lawyer will ask numerous questions and make various enquiries all designed to ensure that the agreement has the best possible chance at standing up to future challenge in the Family Court. Often people want to rush into these agreements and simply think that a standard template will do the job – nothing could be further from the truth.

Below are some examples of the due diligence questions that we ask and undertake in the preparation of each and every Financial Agreement. However, each case is different and usually we insist upon talking to our clients and / or their advisors in detail to get a feel of any special issues that may be relevant. The list of relevant enquiries can include the following:

  1. Enquiries as to the mental health status and capacity status of each party;
  2. Enquiries as to the history of any mental illnesses of both parties;
  3. Is each party able to read and write English – is English their main language;
  4. If English is not one party’s main language, then one needs to consider use of interpreters and other corroborative evidence to prove an understanding of the agreement and what has been signed;
  5. Has a party moved residence from overseas and given up contact with family and their homeland in order to marry and live with the other party in Australia;
  6. Has there been any incidences of domestic violence recently or does either party have a history of domestic violence;
  7. Are there any domestic violence Orders in place or have there been domestic violence Orders in the past;
  8. Has either party said to the other party that they will not enter into the relationship without the agreement being signed;
  9. Has either party put any other conditions on the relationship continuing concerning the terms of the agreement;
  10. Are the parties rushing to sign the agreement before the wedding date;
  11. Is there a willingness on behalf of both parties to provide very open and detailed disclosure about their financial affairs to the other prior to entering into the agreement;
  12. Is each party prepared to listen to the other party’s views on the terms of the agreement and incorporate reasonable amendments requested by them; and
  13. Has each party independently sourced their lawyer free of influence from the other party.

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