If you missed our first two articles you can review these articles here. In this next instalment, William Sloan writes about the steps required, the costs involved and the potential costs that might arise if a Financial Agreement is not in place.
Usually the making of a Financial Agreement involves the following broad phases or steps:
- Disclosure of information and documents about the parties existing financial circumstances.
- Negotiation as to the terms to be contained in the Financial Agreement.
- Drafting of the Financial Agreement.
- Provision of detailed written advice in relation to the proposed Financial Agreement. Each party must get independent legal advice. This means that there will be one lawyer acting for one party and another lawyer acting for the other party.
- Execution of the Financial Agreement.
There is no mechanism for the registration of Financial Agreements in Australia. The Agreements are a private document. Once signed, they need to be held in a safe location along with other similar documents, such as Wills and so forth.
Factors that can influence the extent of the work required and the associated costs involved with making a Financial Agreement include:
- The extent to which the negotiations about the terms of the Financial Agreement are conducted directly between the parties as compared to being conducted by lawyers on their behalf;
- The complexity of the parties’ financial circumstances before the Agreement is made. For example, the extent to which the parties are involved with various entities such as companies and trusts.
- The complexity of the terms that are negotiated to be recorded in the Financial Agreement.
Typically speaking, one party to the Agreement will take responsibility for most of the work associated with the drafting of the Agreement. Typically, that party will have higher costs than the other party. For the party who takes responsibility for the drafting, it is not uncommon to incur costs in the range of about $5,000 to $10,000. Depending upon the particular circumstances, the costs in individual matters can be higher or lower than those typical costs.
When considering the costs associated with making a Financial Agreement, it is relevant to have regard to what might be the potential costs if no Financial Agreement were in place. These costs include:
- The costs associated with being involved in a contested case before the Family Court. Due to delays in the system, it is not uncommon for the Court to take between 2 and 3 years to deal with a case. Over that period it is not uncommon for significant legal costs to be incurred by each party. Over the course of 2 or perhaps 3 years of litigation, each party might incur costs of perhaps $50,000 to $150,000 (potentially higher);
- There is also the question of the amount that the Court might award to the other party. Without a Financial Agreement in place, the Court will be in control of how much is awarded to the other party. The Court is not constrained by considerations such as whether a particular amount was received as part of an inheritance. In contrast, if parties enter into a Financial Agreement, they remain in control of the outcome.
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.
Next week will be our final instalment of Financial Agreements and how they interact with estate planning, foreign agreements, foreign assets and are Financial Agreements binding.