Binding financial agreements or Prenups as they call it in the US

Dear friends and readers

The last few months have been a blur of activity, legal and non legal.

I was appointed as Manager of the WA State Under 15s Badminton team that traveled to Queensland this month for the National team and individual events.

My son Tyzton was the captain while my wife Annie was the  team umpire. My older son was the assistant coach. It was a family affair and the team did exceptionally well as they won a historic silver team medal. This is the first time since 2005 when the event started, that WA has won a silver medal. I was proud to have helped WA make history.

The WA Team winning silver

See http://badmintonwaunder15s.blogspot.com.au/

Tyzton also won the silver medal for the boys doubles. He won his first gold national trophy by winning the mixed doubles event with Joy Lai from Victoria.

He has been ranked 4th in Australia and has now been invited to represent Australia in the Singapore Youth International competition next month. My older son Jazton has also been invited to play in the Under 17s competition.

As proud as I am as a dad, the legal work has to continue.

Here is an article written by Val Antoff from my office regarding binding financial agreements.

Binding Financial Agreements

Are they the next best thing to divorce insurance?

For most of life’s vicissitudes there is an insurance cover. For managing the financial aspects of a potential marriage or de facto relationship breakdown there is a binding financial agreement (BFA).

Such agreements are the only security that parties planning to enter into a de facto relationship or already married have at their disposal for the protection of their assets if the marriage sours. But beware, BFAs could not always be relied upon as legally binding as a number of recent court decisions in Australia have demonstrated.

Information from unverifiable sources suggests that a large number of marriages and de facto relationships are the result of online dating. However an online profile would revel little if anything about a person’s character and intentions. This is just one more reason for people searching for their soul mate to consider ways of protecting their assets.

This article summarises the main features of a binding financial agreement, its use and the factors which will most likely contribute for a BFA to be set aside by the courts.

1)     Brief History

For married couples in Western Australia changes to the Family Law Act 1975 (Cth) which came into effect in December 2000 allowed parties about to marry or who were married to sign a binding financial agreement about the financial arrangements should their marriage break down. Parties were also permitted to enter into a BFA upon the breakdown of their marriage.

Two years later, in December 2002, changes to the Family Court Act 1997 (WA) made BFAs available to de-facto couples including those of the same sex who have lived in WA.

In March 2009 changes to the Family Law Act 1975 (Cth) made BFAs available to de-facto couples in the rest of Australia.

2)     Definition

A Binding financial agreement is a legal agreement between two spouses about maintenance the division of assets should their marriage or de facto relationship break down.

Binding Financial Agreements are also known as pre nuptial agreements (prenups), post nuptial agreements (postnups) or separation agreements.

3)     The law that governs BFAs in Western Australia:

a.     The law that governs BFAs for those contemplating marriage and all married couples is the Family Law Act 1975 (Cth);

b.    The law that governs BFAs for all couples in a de facto relationship is the Family Court Act 1997 (WA).

4)     How does it work?

The forum where decisions about the division of assets of splitting couples are made is the Family Court of Western Australia. A valid binding financial agreement however ousts the jurisdiction of the court. It prevents either party from making an application to the court for division of assets in property settlement different from the terms of the agreement. A BFA does not bar the parties from seeking an order from the Family Court to set the agreement aside. Some of the arguments for seeking such orders are discussed later in the article.

5)     When can I enter into a BFA?

a.     Parties can enter into a BFA before marriage or before moving together for de facto couples.

b.    During marriage or cohabitation.

c.     After separation.

6)     What matters can a BFA cover?

a.     Financial settlement (property settlement) – all or selected property of the parties. It may include property acquired before or during the marriage or de facto relationship.

b.    Financial resources – for example any inheritance that a party may receive during the marriage.

c.     Rules about buying and owning property – the parties may agree about whose name the property will be registered in, who will be paying for the mortgage and the maintenance of the property etc.

d.    Superannuation is considered property and therefore parties may agree on the division of their respective superannuation interests in case of separation.

e.     Financial support (spousal maintenance);

f.     Any incidental issues

7)     What doesn’t a BFA cover?

a.     Child support;

b.    Non-matrimonial issue such as house duties;

c.     A BFA is not a replacement for a valid will. It is however an important part of a person’s estate plan.

8)     How much does it cost?

The preparation by a BFA is only a fraction of the costs of property settlement litigation. The preparation of a BFA starts from around $2,000 plus GST compared to the cost of court litigation which may range up to $35,000 in cost for a simple matter.

9)     Legal requirements for a valid BFA

There are a large number of legal requirements that must be satisfied as a precondition for a valid BFA. They include the following matters:

a.     The agreement must be signed by both parties;

b.    Both parties should receive independent legal and financial advice before signing;

c.     The agreement must contain, in relation to each party, a statement to the effect that the party to whom the statement relates has been provided, before the Agreement was signed by him or her, with independent legal advice from a legal practitioner as to the following matters:

                                          i.    The effect of the Agreement on the rights of both parties;

                                         ii.    Whether or not at that time when the advice was provided it was to the advantage financially or otherwise of that party to make the Agreement.

d.    Paragraph 11 discusses further issues that may impact on the validity of the agreement.

10)  What are the benefits of BFA?

The following list contains some of the commonly cited benefits of a binding financial agreement:

a.     Provide certainty by means of a predetermined outcome in the case of separation;

b.    Protection of personal and business assets from future dispute;

c.     In contracts to court made property settlement orders a BFA does not have to be an equitable one. Therefore one party which has significantly more assets than the other party can protect their assets better than by court orders;

d.    Protection of inheritances received during the relationship;

e.     The agreement stays private as the matter does not have to be argued in open court;

f.     Financial disclosure is required for the validity of the agreement but no further disclosure is necessary to the court;

g.    The costs for preparing a BFA ($2,000 – 3,000) are significantly lower compared with the costs of consent orders ($6,000 – 8,000) and only a fraction of the costs of litigation (estimated at $35,000 depending on the circumstances of each case);

h.     The recitals (the introduction to the agreement) can be used to give the background to the agreement and to justify its terms;

i.      The same tax concessions apply as to court orders, e.g. the transfer of property from one spouse to the other does not attract more than $20 stamp duty payment.

j.      Unless agreed otherwise a BFA will be binding on the estate in the event of death of one of the parties;

k.     A BFA can reduce the potential for argument between the parties in relation to financial matters both during and after their marriage and between the surviving spouse and the family of the deceased partner.

l.      Preservation of family businesses;

m.   A BFA can reduce the potential for family disputes on the death of a party to a second or subsequent marriage;

n.     Protection of the parties’ superannuation interests.

o.    Sets out maintenance arrangements in the event of separation.

11)  Can a BFA be set aside by the courts?

The Family Court in Australia has the power to set aside a BFA on application by one of the parties to the agreement. The legislation contains an extensive but not exhaustive list of the reasons for setting aside BFAs. They include the following matters:

a.     fraud, including material non-disclosure (eg. failure to disclose the existence of or the true value of an asset); or

b.    a party to the agreement entered into the agreement for the purpose of defrauding or defeating a creditor or creditors of that party; or

c.     the agreement is void, voidable or unenforceable (ie. the agreement must be prepared properly and in accordance with the legislation); or

d.    circumstances have arisen since the agreement was made which make it impossible or impracticable for the agreement, or a part of the agreement, to be carried out; or

e.     since the making of the agreement, a material change in circumstances has occurred that was not dealt with or foreshadowed in the agreement (relating to the care, welfare ad development of a child of the marriage) and, as a result of the change, a party to the agreement will suffer hardship if the court does not set the agreement aside; and

f.      a party’s conduct in the making of the agreement was, in all the circumstances, unconscionable.

12)  Can a BFA be terminated?

A BFA can be terminated in the following circumtstances:

a.     By executing a termination agreement; or

b.    By executing a new BFA with a clause terminating the previous BFA.

13)  Who is a BFA suitable for?

a.     Parties intending to marry;

b.    Parties intending to live in a de facto relationship;

c.     Paties who are married and not separated;

d.    Parties who are living in a de facto relationship and not separated;

e.     Parties who are married and separated but not divorced;

f.     Parties who were living in a de facto relationship and have separated;

g.    Parties who are divorced.

14)  Who should seriously consider entering into a BFA?

a.     Parties with significant disparity in personal wealth;

b.    Parties entering into second marriages – to avoid stress and costs with potential breakdown of second marriage and provide for children of previous relationships. In such circumstances a BFA becomes an important estate planning tool;

c.     Parties who want to keep assets acquired prior to marriage separate to jointly acquired assets.

d.    Parties who wish to use a BFA as an asset protection tool. For example, where a couple wishes to register all their assets in the wife's name, the BFA will set out  the husband's financial interests in those assets regardless of whose name the assets have been registered in;

15)  In what circumstances isn’t a BFA suitable?

a.     If a party is eligible for income tested pension, allowance or benefit at the time of signing the agreement.

b.    If the parties want to include in the agreement parenting issues such as time the children will spend with each parent;

c.     Parties who want to set out in the agreement the terms for child support payments.

d.    Illegal agreements;

e.     Division of household responsibilities;

f.     Not suitable for parties who wish to sign the agreement within 4 weeks prior to the wedding because of the potential for a court to set it aside for undue influence, usually by the party in the stronger bargaining position.

16)  Is my BFA valid/legal outside of Australia?

Australian binding financial agreements may not be upheld by a foreign court. If the parties to an agreement move abroad they should seek local legal advice about the validity of their agreement.

Summary

Binding financial agreements are not only for the wealthy. Considering the high frequency of marriage breakdown as well as the stress and time and the high cost of family law litigation a BFA can benefit just about everyone.

As mentioned earlier in this paper not all BFAs have been upheld by the courts in Australia. With the help of a qualified and experienced lawyer in this area your BFA has a greater chance to stand up in court.

Till I blog again, take care.

Raymond Tan

Surviving the CEO Sleepout at temperatures below 2 degrees

Dear friends

Last Thursday was cold. Very cold. It got to around 2 degrees. Luckily there was no rain.

The sleeping bag given to me for my birthday by my staff really came in handy. During the evening, we heard tales of how the homeless in Canada have it even tougher sleeping in the snow.

We are indeed a lucky country, but the luck does not extend to everyone. Homelessness is on the rise. We are lucky that there are leaders of industry that have the heart to get involved in fund raising for this event.

I raised just over $18,000 this year and was ranked 12th out of a total of 109 CEOs in WA.

WA raised a total of $756,000 while the CEOs in the whole of Australia have raised a total of $5 million this year.

It was again a good experience and it has ingrained in my mind and heart how fortunate I am.

Till I blog again, good night.

I was able to enjoy a plate of lamb shanks before getting to the WACA.

My usual sleeping spot at the WACA. Same spot for 3 years. I should consider taking a lease.

Help your lawyer to help you

Dear readers

 

I would like to thank Val Antoff for preparing this article which I am sure will make interesting reading.

 

How to reduce your legal bill?

1.     Get documents and info ready

a.     Ask for a questionnaire and bring it completed to the initial interview.

b.    Bring copies of all relevant documents to your first interview including:

                                          i.    Agreements;

                                         ii.    Financial statements;

                                        iii.    Court documents;

                                        iv.    Videos, photos, valuation reports etc

c.     If you need evidence from a third party it may be cheaper to arrange it yourself, e.g. valuation of a property or a company.

d.    Lawyers work with chronologies - this is a list of events in chronological order. Have one ready before you see your lawyer.

e.     Instead of handing over a bundle of documents to your lawyer you can save on costs by categorising and indexing the documents yourself.

f.     Do not spend time in the presence of your lawyer reading lengthy documents and completing questionnaires and other forms if you can do this at home.

2.     Have clear objectives

Write down the best outcome that you are hoping to achieve in your case. Then write down the second and third best outcomes that you will be prepared to accept. Expect a difference in legal costs for achieving each of the three different outcomes.

3.     Choose the most cost effective method to achieve your objectives

Research the different options for resolving your problem – negotiation, mediation, collaboration, arbitration, court action etc. Court action is usually not the only option but it is likely to be the most expensive one. Try resolving your problem through one of the more cost effective methods before going to court. Your lawyer should be able to advise you further.

4.     Ask for an estimate of costs

Lawyers in Western Australia are obliged to give clients an estimate of costs in writing in the form of a retainer agreement if the expected costs are likely to be more than $1,500. Ensure that you have been given not only an estimate of costs but also a list of variables that may affect the size of your legal bill.

5.     Scope of work

Define the scope of work to be performed by your lawyer - any scope creep will increase your legal costs.

6.     Have a budget

Tell your lawyer what your budget is, if you have one, and seek assurances that your matter can be completed within your budget.

7.     Communicating with your lawyer

Request from your lawyer a progress report. Discuss with your lawyer the time interval between each report and avoid contacting him/her just to follow up unless you have to. Your lawyer should be forwarding to you all correspondence from the other party in relation to the matter as soon as it arrives. Calls to mobile phones are usually charged at a premium – give your lawyer a landline number, if you have one, as your primary contact number.

8.     Recovery of legal costs

Check with your lawyer if it is likely for you to recover from the other party any of the legal costs in your matter. Not all costs are recoverable and even if you are awarded costs by the court you will never be able to recover the total amount you have spent on your lawyer. 

 

You might be able to cover all points from 2 to 9 above easily if your lawyer has project management skills and knowledge. Ask your lawyer for a written outline for the management of your matter.

 

9.     Quality systems

Look for a law firm which has been accredited by the Law Society in your State as a quality service provider. Such firms usually have a quality management system in place which helps increase efficiency, predictability and quality. Efficiency is inversely proportional to your legal bill – higher efficiency means usually lower costs.

10.  Be succinct

Stick to the relevant facts rather than the emotional issues in the matter, avoid irrelevant issues, you will be paying for those too.

11.  Involving family and friends

If you are bringing family members and friends for support to your lawyer’s office instruct them to stay quiet. They may be more useful to you if they take notes of what is being said than becoming involved in the discussion with your lawyer.

12.  Pay bills on time

Lawyers are entitled to charge you interest on any outstanding bills. Make sure that you can secure the funds before you engage your lawyer and subsequently pay your bills on time.

13.  Choose your lawyer carefully

Changing lawyers after you have signed the retainer is most likely going to increase your legal costs. The new lawyer will not be able to take off from where your former lawyer stopped work on your matter. The new lawyer will charge you a premium for familiarising him/herself with your matter.

14.  Settle early

Consider all possible options to settle the matter early. Ask your lawyer to help you reach a sound commercial decision. Early settlement is likely to reduce your legal bill significantly.

15.  Engage a lawyer to review your documents before your sign

Review by a lawyer of contractual documents  ( such as a contract for building a house, sale of a real estate, retirement village agreements etc) that you are considering signing is most likely to be cheaper than your lawyer’s fees for trying to resolve issues arising from the ill-advised execution of these documents.

16.  Documents that you should prepare now

There are certain documents that you should prepare now while you can such as your personal estate plan and your business succession plan (if you have a business). Failure to do so in time is likely to cost your loved ones a lot more when they will need to deal with your estate. Visit www.affordablelaw.com.au for more information.

17.  Do not delay seeking legal advice

Delay may not only be costly but may also block you from starting legal action. There are certain time limits that apply.

18.  Unbundle your legal services

If you are willing and able to do some of the work in your matter then you may ask your lawyer to carry out not all but only some specific tasks on your behalf. This approach may reduce your bill in the short term but may be costly later if you make a mistake.

19.  Always have a written agenda

Write down the issues that you want to discuss with your lawyer. Always identify the issues is dispute and the agreed issues with the other party. Email or post the agenda to your lawyer so that he/she can get prepared before the meeting so you can get the maximum benefit of your meeting.

20.  Contact support staff for non-legal questions

Most questions that do not involve legal advice may be answered by your lawyer's personal assistant. Talking to support personnel is always cheaper than talking to your lawyer.

21.  No two cases are the same

Do not rely on the advice of your friends or family members which is based on their personal experiences. It may be more expensive to fix problems created by such an advice than to pay for your lawyer’s advice instead.

22.  Fixed fees legal service

If you are looking for predictability of legal costs than you should consider a lawyer who offers fixed fee legal services.

 

 

Collaborate with your lawyer! 

Taking part in the CEO Sleepout again

Dear friends and readers,

Yes, the time has come again for me to take part in the St Vincent De Paul Society CEO Sleepout. This is where CEOs of companies sleep out at the WACA to experience homelessness.

This is my 3rd year of sleeping rough and raising funds for the homeless in Perth. The event is on 21 June and promises to be a cold night.

Last year, I raised over $18,000 and was ranked 4th out of over 90 CEOs. This year has been a slow start and infact WA seems to be lagging behind in donations received compared to the other states.


For those who wish to donate, please see http://www.ceosleepout.org.au/ceos/wa-ceos/profile/?ceo=283

Just take out your credit card and make the donation. You will feel warm and fuzzy after.

At the last Census, 104,700 Australians were counted as homeless (Australian Bureau of Statistics 2006) with 50,256 Australian’s on the street, every night. The growing incidence of homelessness has not been accompanied by an increase in services to meet demand. While Vinnies operates a wide range of homeless services across the country, many areas remain without specialist homeless and housing services to support the needs of people experiencing disadvantage.

WA is a booming state, but the gulf between the have and the have not is growing bigger. Dig into your pockets if you can help. It is tax deductible.

Good night.

Common mistakes made by newly weds and their wills

Dear friends and readers

Val Antoff  who works with me on the www.affordablelaw.com.au website has written a new article about wills and their relevance to newlyweds. I am sure if you are newlywed, or planning to wed, the article will be of interest.

Do call me for a consult if you feel the article has raised an issue or two regarding your estate planning.

Common mistakes made by newlyweds in relation to their estate plans

1. Not having a valid Will

If you are one of those highly organised people then you are likely to have had a duly executed Will at the time of your wedding. However, unless you made your Will in contemplation of your marriage your Will has been revoked by operation of the law. Do not assume that if you die without a Will your spouse collects everything. This is not always the case. Your estate will be distributed under your legislated Will and the outcome might be significantly different from what you would have liked to happen with your assets.

2. Forgetting to execute or review your Living Will.

A Living Will ensures that all financial, healthcare and lifestyle decisions will be made by the person or people you trust most if you became mentally incapacitated. A Living Will is made up of an Enduring Power of Attorney, Enduring Power of Guardianship and an Advance Health Directive. 

3. Forgetting to update the beneficiaries of your superannuation funds.

Superannuation investments do not form part of your estate. Unless you have made a binding death nomination one of your beneficiaries may benefit from your superannuation proceeds to the detriment of another beneficiary as was the case in Katz v Grossman in NSW. 

4. Forgetting to update the nominated beneficiary of your life insurance policy.

If you intend the proceeds of your life insurance policy to go to someone else than the nominee, then you must not forget to change the nominee. If you are uncertain whether you have nominated a beneficiary then you should consult your insurance company.

5. Forgetting to make certain that your children from your prior relationship receive a fair share of your estate.

If you have made a Will and left the bulk of your estate to your present partner and you rely on the moral obligation of your partner to provide for your children from a prior relationship than those children are at risk of not getting what you would have wished for them. Your current spouse may remarry after your death and have further children and leave the assets inherited from you to her children forgetting about any moral obligations to your children. By now you should have seen the pitfalls of leaving the whole of your estate to your present spouse if you have children from a prior relationship.

So if you are planning a wedding, give this article some serious thought before walking down the aisle.

 Good night.

My son Tyzton and his bald head in honour of his grandmother who passed away on 14 Jan 2012 from cancer

Dear friends and readers,

My son Tyzton was very close to his maternal granny. He was her favourite and she was missed very much by Tyzton. In honour of her passing, Tyzton decided to participate in this year's World's Greatest Shave which raises funds for blood cancer.

I was pleased that he wanted to take part and gave him full encouragement.

Here is an email I sent to friends and clients who generously supported him.

Dear friends and clients,

As some of you are aware, my son Tyzton is taking part in the  World’s Greatest Shave. This is in honour of his grandmother who passed away on 14 Jan this year after a long fight with cancer.

Please see  his before and after pictures which are attached.

Tyzton with mum and dad with a full head of hair

His head was shaved at   920 am       today.

Does he not look bald and sad?

Thank you to all my friends and clients who have already donated for this good cause.

He had raised $1866 up till the midnight of 14 Jan 2012. I have matched the donation as I promised him when I first found out he was participating in the event. His total is now $3552 on the day before the shave.

For those who have yet to donate, please go to

http://my.leukaemiafoundation.org.au/personalPage.aspx?registrationID=430563&langPref=en-CA&Referrer=http%3a%2f%2fwww.worldsgreatestshave.com%2f

Just donate under the name Tyzton Tan.

This was my message to him last night before his shave.

My Dearest Younger son,

Tomorrow, your head will be just like the 1st month of your birth when according to Chinese tradition it was shaved bald. Daddy is proud that you are willing to sacrifice all your locks for a good cause and in memory of your grandma who passed away on 14 Jan 2012 after a long battle with cancer. She would have been so proud of you.

Daddy said I would match what you raise when your target was $500. It has jumped to nearly $2000 much to the pained expression in my face every time the figure went up. However it is a good cause and you should be proud of what you have done and what you will do tomorrow. Mummy and Daddy will be there tomorrow when you lose your hair as we always support and love you. Good luck and well done.

The girl badminton players at the National championship will have to watch out for Speedy Baldy next month.

Yes, the family will be going to Tasmania next month for my 2 boys to compete in the National Under 17s Badminton championship.

Have a look at http://badmintonwaunder17s.blogspot.com.au

Tyzton will feel the chill in Tassie without his trademark locks.

I am sure many of the girl players will like to feel his bald head, so that is a consolation.

So what has all these got to do with the law. 

I think that lawyers should contribute to society more often than less often. Fundraising for a good cause is always a good start.

If we instill such character in our children and our colleagues, the world will I hope be a better place.

My favourite charity is still the St Vincent De Paul Society CEO Sleepout where we raise funds for the homeless by sleeping as a homeless person for a night.

I am in the process of setting up a foundation for the Edie and Royce Hoy Poy Family. Edie who was a very influential person within the Asian community in Perth passed away last year. She bequested half of her estate for the purpose of setting up a foundation to provide services for Aged care in WA.  I will keep all updated on the work the trustees are doing to make sure that her bequest is benefited  by the old folks of WA for whom Edie had a special place in her heart.

Good night.