This article is part two of Financial Agreements. If you missed our first article last week, of “The What, Who and When” – you can review it here.
In this article, William Sloan looks at examples of situations that might make it worthwhile to consider a Financial Agreement.
It is not uncommon for adult children to become increasingly involved with family businesses over time. This may include the children:
- becoming shareholders in or directors of companies;
- having money owing to the children pursuant to loan accounts;
- a range of other arrangements being put in place.
As part of a wider conversation about succession planning, it may be prudent to consider asking adult children to enter into Financial Agreements with their partners.
Without a Financial Agreement in place, property that has been placed in the name of the adult child (for example, shares in a company) is property that will be subject to claim in the Family Court if there is a relationship breakdown between the adult child and their partner.
A Financial Agreement can provide a degree of protection for that property.
If a party has already received an inheritance or is expecting to receive an inheritance at some stage in the future, then they may wish to consider entering into a Financial Agreement to provide a degree of protection for the inheritance.
If parties separate without a Financial Agreement in place, there is no automatic quarantining of inheritances if the entitlements of the parties are being determined in the Family Court.
A Financial Agreement could, for example, provide that the inheritance is to remain with the party who received it while other assets accumulated jointly by the parties are divided between them following separation.
Parties may be entering into a second relationship. At the breakdown of their first relationship, they may have experienced being involved in Family Court proceedings and the associated costs and delay. Having experienced those aspects of Family Court proceedings at the end of their first relationship, they may be seeking to avoid those outcomes in respect of the second relationship.
Entering into a Financial Agreement can be a means of achieving that.
A party may have children from a first relationship and be entering into a second relationship. They may wish to ensure that their assets are protected and available to be passed on to their children.
Without a Financial Agreement in place those assets are exposed to a claim if the second relationship breaks down. A Financial Agreement can provide a degree of protection for that property, ensuring it remains available for it to be passed on to the children.
For further information in relation to this situation, look out for the next instalment featuring “How do Australian Financial Agreements interact with foreign agreements”.
If you are considering the preparation of a Financial Agreement, please contact our office on 6380 3900 or email firstname.lastname@example.org and we will be happy to assist you.
Our next article we will look at “What are the steps, what are the costs and what are the potential costs that might arise if a Financial Agreement is not in place”.