25 Apr Knowing How to Secure Your Future: A Guide for Young People on Financial Agreements
With the evolving landscape of relationships and growing financial independence among young people, financial agreements are becoming increasingly popular. This article explores the importance of early planning for young couples, examining how Financial Agreements can provide financial security and mitigate potential disputes.
What is a Financial Agreement?
A Financial Agreement is a written legal agreement that parties to a relationship can enter into, detailing how their interests in joint or separate property are to be dealt with in various circumstances. Under the Family law Act 1975 (Cth) (“the Act”), parties can enter into a Financial Agreement before, during or after their relationship ends.
Entering into a Financial Agreement is one way to reduce the risk of being involved in court proceedings in the event of a relationship breakdown. Without a Financial Agreement, parties are subject to the Court’s wide discretionary power under the Act and this may produce a very different result than if you were to have entered into a Financial Agreement.
How important is a Financial Agreement for young people?
It is firstly important to consider the nature of your relationship and whether there would be an entitlement to a property settlement claim in the event of separation. Pursuant to the Act, the Court can make an order adjusting interest in property where the parties are either in a marriage or in a de facto relationship.
A de facto relationship requires two persons living together as a couple on a genuine domestic basis and whilst one consideration is the duration of the relationship, there is not a set time frame to quantify a de facto relationship. Other factors include the ownership, use and acquisition of property as well as the degree of financial interdependence between parties.
You do not have to be in a de facto relationship to enter a Financial Agreement, however, being de facto opens the possibility of a property settlement claim by you or your partner.
A Financial Agreement can protect you if you are coming into the relationship with wealth that you wish to protect.
With the growing popularity of cryptocurrency, a sector driven by Millennials and Gen Z, young people are bringing more wealth into their relationships at an earlier stage. The 4thAnnual Australian Crypto survey found that 31% of people aged 18 to 49 held cryptocurrency in the year 2024 compared to only 6% of those aged 50 and over.
The report also found that 42% of crypto owners hold their assets in retirement savings. Historically, young people have had limited assets and minimal superannuation as they are just entering full time work, however, with the rising popularity of cryptocurrency holdings in self-managed superannuation funds, young individuals are seeing higher superannuation balances earlier in their careers.
A Financial Agreement can help ensure any gifts, inheritance or windfalls received in your relationship remain for the benefit of the intended recipient.
With the current cost of living challenges and high interest rates, many young people are becoming increasingly reliant on the ‘bank of mum and dad’ for financial assistance, particularly when it comes to buying a first home.
A Financial Agreement allows parties to be clear on whether money received from parents is a gift or a loan that needs to be repaid, a common dispute upon separation.
Without a Financial Agreement, the court consider large gifts, windfalls or inheritance as a financial contribution on behalf of one party to the relationship which is taken up in their adjustment of settlement proceeds, however, it certainly does not guarantee any of those funds will be returned to the recipient.
How strong is a Financial Agreement?
There are very limited circumstances in which a Court will set aside a Financial Agreement and those include but are not limited to:
- The financial agreement was obtained by fraud (including non-disclosure of a material matter).
- The financial agreement is void, voidable or unenforceable due to duress, undue influence, mistake, misrepresentation, unconscionable conduct or public policy.
- Circumstances have arisen since the financial agreement was signed that has made it impracticable for the agreement or a part of the agreement to be carried out.
- A material change in circumstances has occurred.
- Inadequate legal advice.
If you are considering whether a Financial Agreement is right for you and would like advice on your individual situation, please do not hesitate to contact our office for a consultation.