When prenups** will fail – part II

Last week’s post considered a number of the situations that might lead to prenups (or binding financial agreements) being declared unenforceable. Seven further examples are set out below:

1. Impracticality – for most agreements, they are unlikely to be determined entirely void for impractical reasons, although there may often be components of the agreement that are ignored, particularly in relation to specific assets that can no longer be dealt with in the manner originally anticipated by the agreement.
2. Lack of disclosure – while potentially caught by one of the other items set out above, the failure to provide full and complete disclosure can of itself be grounds for avoiding an agreement.
3. Just and equitable grounds – in many respects, this is reminiscent of the 'vibe' in the Australian movie ‘The Castle’ – i.e. the court interprets the overall circumstances to assess that the agreement should no longer be binding.
4. Public policy – this ground is similar to just and equitable i.e. the court determines that it is not in the public’s interest to see a precedent set for the agreement to be binding in the particular circumstances of the case.
5. Ending due to lapse of time – some financial agreements have a specific time or duration – if no other arrangements are made before the ending of the agreement, it will simply lapse.
6. Termination by agreement – if both the parties voluntarily agree, then the agreement can be terminated absolutely, or alternatively, a replacement agreement can be entered into.
7. Death – many binding financial agreements are specifically crafted to end on the death of either party, however this is often subject to certain provisions being made under the estate plan of the deceased. It is important to be aware that in some states it is possible to have a binding financial agreement whereby the parties also agree not to challenge the estate plan of the survivor, however these rules do not apply in every jurisdiction.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Kayne West song 'Gold Digger'.

View the (kid friendly) Glee version here:

When prenups** will fail – part I

A number of previous posts have highlighted court decisions where prenups (or binding financial agreements) have been held to be invalid.

While the range of situations that might lead to this type of arrangement being declared are not enforceable, six of the main examples are set out below (next week’s post will list another seven):

1. The relevant legislative provisions are not followed – the laws in relation to binding financial agreements are very particular. If each aspect is not followed, then there is a real risk that the document will not be binding.
2. Failure to get independent advice – one of the key characteristics of the provisions is that each spouse must obtain independent legal advice. A failure to do so (or failure to receive specialist advice) can mean the agreement will be void.
3. Unconscionable conduct – this normally arises where it can be shown that one spouse has taken advantage of the other, in circumstances where that other spouse was in a weak position.
4. Abandonment or revocation by conduct – over time, the parties may start to consider themselves not to be bound by the arrangement, and even enter into inconsistent arrangements. If this occurs, then the original agreement is likely to be ignored.
5. Undue influence – this can arise in a range of circumstances and does not necessarily require that a spouse be completely overborne.
6. Duress – if one spouse can demonstrate that they effectively felt that they had no alternative but to sign the document, then a case of duress can be substantiated.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Prince song 'Illusion, Coma, Pimp & Circumstance'.

Listen here:

Another prenup** held to be void

Previous posts have highlighted a number of examples where a binding financial agreement (or prenup) has been held to be invalid.

The case of Adame & Adame [2014] FCCA 42 provides another example where an agreement was set aside.

The factual background of the case was somewhat complex, however briefly:

1. The relationship was described as 'tumultuous' and the parties had separated and then reconciled on numerous occasions.
2. The wife had been told by two separate lawyers (one of whom was introduced and paid for by the husband) not to sign the draft agreement.
3. There was evidence that suggests that the husband may have attempted to avoid disclosing the existence of some assets to the wife.
4. There was a lack of evidence to support that the lawyer who ultimately signed the certificate saying that he had provided the required advice to the wife had in fact provided the advice.

In the context of the above factual scenario, the court decided the agreement was not binding for the following reasons:

1. the wife said she relied on the husband’s representation of the assets that he had and that those representations were false;
2. the court accepted that the wife was 'harassed until she signed the agreement'; and
3. the wife’s lawyer did not discharge all of his duties to provide her with independent advice.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Madonna song 'I don’t give a'.

Listen here:

PRENUPS VS. WILLS – winner takes all? **

Previous posts have explained the various aspects of binding financial agreements (often referred to as 'prenups').

On a number of occasions recently, we have had cause to review binding financial agreements in the context of wider estate plans, and in particular, have had to consider whether, in the event of a death of a spouse, the binding financial agreement takes priority or whether the will applies.

As is the case in many estate planning areas, the rule of thumb to remember is that the issue must always be reviewed on a case by case basis.

This said, generally, a prenup should at least expressly set out whether it is intended to apply on the death of either spouse.

Ideally, the document should be crafted in any event to complement the provisions of the estate plan.

In some situations the provisions can also regulate what should occur if one of the spouses seeks to challenge the provisions of their former spouse’s estate plan.

** For trainspotters, ‘Winner takes it all’ is song by Abba from 1980, learn more here –

https://www.youtube.com/watch?v=92cwKCU8Z5c

Image courtesy of Shutterstock

Beyond death do us part – pre-nups and challenges against estates

Following the posts over recent weeks relating to challenges against deceased estates, this week’s post, with thanks to team member Hayden Dunnett, considers another relevant decision, namely Hills v Chalk & Ors (as executors of the estate of Chalk (deceased)) [2008] QCA 159. The case is important because it starkly highlights the potential significance of a Binding Financial Agreement (BFA) even where the BFA does not comply with the Family Law Act. 

As usual, a full copy of the decision is available via the following link http://www.austlii.edu.au/au/cases/qld/QCA/2008/159.html. 

Mr Hills and Mrs Chalk entered into a ‘pre-nuptial’ agreement in 1994, which was before the ability to make an enforceable BFA.  The terms of the pre-nuptial agreement were essentially contractually based and provided that in the event of their separation, they were each to retain their own assets and make no claim for property settlement, or maintenance from the other.  The agreement also recorded a joint intention to preserve their assets for their respective families.  Importantly, they acknowledged that each party should not seek to defeat the intention of the other.

Mrs Chalk died in February 2003, and probate was granted in April 2003 to the children of Mrs Chalk.  In September 2007, some 4 years after her death, Mr Hills made an application for further provision from the deceased estate.  In her will, Mrs Chalk had given Mr Hills a right to reside in her house, and a legacy of $20,000 in recognition of him caring for her during illness.  The balance of her estate was left to her children.

The court refused Mr Hills’ application stating it was ‘distinctly improbable’ that  Mrs Chalk had failed to make adequate provision for Mr Hills.

In particular, it was held that the ‘pre-nuptial’ agreement made by the parties, although not of itself directly decisive against Mr Hills' claim, was of significance to the assessment to be made by the court of Mr Hills' application for further provision.

Following the decision in this case it is generally accepted that a BFA, perhaps even if not binding for Family Law purposes, will be taken into account in any claim for further provision from an estate.

Until next week.

Image credit: Leo Grübler cc

De facto relationships - further examples

Further to last week’s post, the list below sets out some of the specific circumstances that are taken into account by the courts to determine whether a relationship does amount to a de facto relationship.

Circumstances of the relationship taken into consideration include any or all of the following:

(a) the duration of the relationship;
(b) the nature and extent of their common residence;
(c) whether a sexual relationship exists;
(d) the degree of financial dependence or interdependence, and any arrangements for financial support, between them;
(e) the ownership, use and acquisition of their property;
(f) the degree of mutual commitment to a shared life;
(g) whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;
(h) the care and support of children; and
(i) the reputation and public aspects of the relationship.

A link to the above definition is as follows:
http://www.austlii.edu.au/au/legis/cth/consol_act/fla1975114/s4aa.html

Until next week.

What is a de facto?

Following on from last week’s post, I thought it would be useful to also summarise the definition of 'de facto'.

This particular definition is taken from the Family Law Act (Section 4AA).

In summary, a person will be in a de facto relationship with another person, if:

(a) the persons are not legally married to each other; and

(b) the persons are not related by family (see subsection (6)); and

(c) having regard to all the circumstances of their relationship, they have a
relationship as a couple living together on a genuine domestic basis.

A link to the above definition is - http://www.austlii.edu.au/au/legis/cth/consol_act/fla1975114/s4aa.html

Until next week.

What is a spouse?

The issue that what kind of relationship satisfies the definition of a 'spouse' has been coming up increasingly regularly.

The Tax Act sets out one of the most used definitions in this regard and I thought it useful this week to extract that definition in its entirety, given that it has been amended relatively recently.

A "spouse" of an individual includes:

(a) another individual (whether of the same sex or a different sex) with whom the individual is in a relationship that is registered under a State law or Territory law prescribed for the purposes of section 22B of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section; and

(b) another individual who, although not legally married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple.

Until next week.

Prenups and the need for independent legal advice

An interesting issue came up recently in relation to a 'prenuptial agreement (more technically referred to as a 'binding financial agreement')'.

In particular, as many would know, the need for both parties to the relationship to obtain independent legal advice was brought into question because often one party will choose not to follow the advice that is provided. That is the lawyer may recommend that the agreement not be signed, however the client will still sign.

Based on recent cases, it seems clear that:

1. There is no need for independent advice to be actually accepted or followed to satisfy the requirement that independent advice is sought.

2. Even if advice provided by the independent lawyer is later shown to be incorrect, the criteria that independent advice be sought may still be satisfied.
Until next week.

Do prenups actually work?

The above question was posed to me during the week and, unfortunately, when I was told to make my answer succinct, the only thing that easily came to mind was 'it depends'.

Many advisers will be aware that prenups (or as they are more technically termed in Australia 'binding financial agreements') have been available for around 10 years now.

There have been a number of changes to the way in which the rules in this area work and the most significant of these changes occurred towards the end of last year.

While there were a number of quite heavily publicised cases where what otherwise appeared to be binding agreements were held to be invalid, the changes made towards the end of last year have generally been seen to be positive steps to ensure that disgruntled spouses cannot extract themselves from previously made promises on the basis of a legal technicality.

Until next week.