The terms “financial agreement”, “binding financial agreement” or “BFA” are often used in reference to contractual agreements which parties may enter into under the Family Law Act (1975). There are various agreements which may be entered into under the Act. In this article we look at one specific type “cohabitation agreements”.
What is a Cohabitation Agreement?
Under Section 90UB and 90UC of the Family Law Act 1975, couples have the ability to make a financial agreement to protect their assets. This type of agreement formalises how a couple’s assets, property and superannuation will be distributed in the event of a relationship breakdown. A cohabitation agreement is not just applicable to de facto couples. You may enter an agreement:
⦁ Before getting married (a pre-nuptial agreement);
⦁ While married or in a de facto relationship;
⦁ While separating from a spouse but before applying for divorce; or
⦁ After a de facto relationship breakdown or divorce
Why Enter a Cohabitation Agreement?
There are several reasons why a couple may choose to enter into a financial agreement, including :
⦁ Couples looking to protect their assets, both current and future. For example, if one party of the de facto relationship has more assets than the other party, then signing an agreement may prevent if the relationship breaks down.
⦁ Individuals entering a new de facto relationship or marriage who have children from a previous relationship might look to sign a cohabitation agreement to protect their children financially in the long run.
⦁ A person or party who is entitled to an inheritance at a later stage in life, or if one party operates a family business or is part of a family business that needs protecting.
Parties may also benefit from stamp duty concessions and Capital Gains Tax relief when entering a cohabitation agreement.
What makes a good cohabitation agreement?
The best cohabitation agreement is one that fits the circumstances of the parties and their requirements. Ideally, the agreement will be simple and direct.
Normally, parties wish to list:
⦁ Separate assets which each party already owns and which they wish to remain separate from the rest of the parties’ assets;
⦁ New separate assets – parties may wish to have the flexibility to use their separate assets as security or collateral to acquire new assets or to sell separate assets and acquire new separate assets
⦁ Future inheritances
In relation to joint assets, there should be a clear description in the cohabitation agreement of the entitlement each party has to assets in joint names, which may be proportionate to the title they acquired when the parties initially purchased the joint assets.
In the event of separation, the agreement should have a clear process for the parties to divide their assets between, which may include provisions to:
⦁ give each party the opportunity to buy the other party’s interest in joint property; or
⦁ to sell the joint assets and divide the proceeds between the parties.
Geldard Sherrington Lawyers has a team of experts in Family Law and can offer guidance and advice about entering into a Cohabitation Agreement, or any other type of Family Law or financial agreement. If you would like to speak further with one of our family solicitors, give us a call on 07 41 94 5422 or contact us online here.