Divorce can have damaging effects for small business owners, especially if the separation comes unexpectedly some years after starting a business.

Perth small business owners already face a tough road to build their enterprise. Not only does divorce add stress that you take to work, you could also face losing all or part of the business unless you are prepared.

How to safeguard your business

Prenuptial agreement

We understand this can be an emotionally difficult subject to discuss so our family lawyers can offer advice on drawing up a prenuptial agreement that protects both parties in case of divorce. You can find out more information here.

Keep clear and detailed accounts

Maintain separate business and family accounts and avoid using business funds to pay for personal expenses.

Have a plan

If you think your relationship might be in trouble, consider ways to ensure you maintain control of your business. This may mean playing a larger role in the daily management of the business.

Get a professional valuation

Knowing what your small business is worth, and could be worth in the future, will help you understand your position during a divorce.

Forfeit other assets

To retain 100% of the business you may need to compromise on other jointly owned assets. Work with your divorce lawyer to identify what is most important based on a fair valuation.

Get the right support and advice

With so much information available it is easy to be misled by what you read or hear. The truth is no two separations are the same.

Find out more about your financial position in case of separation with a free 15-minute consultation with a reputable Perth lawyer, or read more on our website.

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Property settlements aim to reflect what is fair for both parties. Reaching an agreement without the help of a family lawyer is difficult and emotionally charged for even the most amicable couples.

How property settlements are worked out

Knowing how the courts determine a fair settlement will help you prepare for the process ahead. Although both parties may not have the same perspective on what is ‘fair’, there are  generally four steps your family lawyer will work through:

1. The value of all property of both parties

Regardless of whose name they are in or when they are were acquired, all assets and liabilities should be considered in the shared pool. This includes savings, real estate, home loans, cars, credit cards, businesses, business loans, superannuation, companies and trusts. It also includes property and financial interests shared with a third party.

2. Contributions from both parties to the relationship

The definition of contributions is broader than just financial. The court will look at homemaker and parenting contribution, and other non-financial contributions. For example, if you or your ex-partner took time off work to raise a child, the court takes this contribution to the family very seriously.

3. Needs of the parties (current and future)

Commonly the needs question takes account of each party’s age, ability to earn, health, and responsibilities caring for children. This element can be complicated because it should consider future inheritances and support, financial or otherwise, which can be hard to quantify.

4. Determine a just and equitable split

The final step is to take a step back and consider what the proposed settlement actually means for each party in dollar terms, and determine whether it is fair for both of them. Although it seems straightforward there are the perspectives of both parties to consider. Separation is tough enough without ongoing stress and arguments if one party feels like they are being short changed.

Leach Legal can help; book a free 15-minute consultation with one of our experienced family lawyers to ensure you receive a fair division of property and financial assets.

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Prenuptial Agreements in the 1700s

The “pre-nup” agreement that Captain Phillip signed go back to Egyptian Times and possibly beyond. Typically, however, the arrangement was to predetermine the property rights of the couple by embedding these rights in the marriage contract itself, rather than having a separate agreement. The Hebrew marriage contract, the ketubah attempted to predetermine the property division upon divorce or widowhood. Many earlier agreements were entered by the parents of the bride and groom on their behalf to protect family wealth and predetermine inheritances.

However, many societies sought to stabilise marriage by impose a financial penalty particularly on husbands if the marriage contract was broken, reflecting the contractual basis of marriage.

By the mid-19^th century husbands were responsible for the provision of their wife’s property interests upon their deaths by way of providing the wife with Dower Rights. In addition, if a dowry was brought into a marriage, then an agreement could be drafted before the marriage as to how the dowry would be dealt with upon separation.

Divorce Applications in the Ecclesiastical Court

Prior to the English Divorce and Matrimonial Causes Act of 1857, Ecclesiastical Courts applied Canon Law for matrimonial causes such as pronouncing nullity of a marriage but not divorce of a valid marriage, as marriage was seen as a sacrament and indissoluble. Divorce of a valid marriage would only occur upon a petition to Parliament, making this remedy only available to the very wealthy. Women would rarely apply for a divorce and only in exceptional circumstances.

In England, both the common law courts and the ecclesiastical courts did not automatically and were reluctant to enforce agreements entered into before marriage that displaced the rights and responsibilities of husbands and wives according to the marriage contract as this was viewed as being against public policy.

During the 20^th century, while not enforceable, courts gave increasing weight to these agreements in determining the division of assets upon divorce.

Prenups in Australia

In Australia, pre-nuptials became enforceable by the introduction of the Family Law Act in 1975.  Now, any couple either in a married and unmarried relationship can oust the jurisdiction of the Family Court and decide for themselves how they will divide their property prior to entering a relationship. The traditional benefit of protecting family wealth remain, however, now couples can avoid costly future litigation upon the breakdown of their relationship by determining amongst themselves with legal advice how they will divide their assets at the outset of their relationship.

To discuss prenuptial or financial agreements please contact Gary at Leach Legal.

[1] Dalton T, & Lobbecke E, The Weekend Australian 20-21 January 2018

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Facts of The Case: Thorne v Kennedy

The parties met over the internet in 2006. Ms Thorne was a 36 years old Eastern European woman living in the Middle East with no assets. She had been married before.
Mr Kennedy was a 67-year-old wealthy Australian property developer with assets worth between $18 million and $24 million. He was divorced with 3 adult children.
Mr Kennedy travelled overseas to meet Ms Thorne shortly after meeting her online. He told her that if he liked her he would marry her but “you will have to sign a paper. My money is for my children.”
He travelled overseas twice to meet Ms Thorne. They took an extended holiday around Europe.
In February 2007, she moved to Australia to live in Mr Kennedy’s penthouse with the intention of getting married.
The wedding was set for 30 September 2007.
About 10 days before the wedding, Mr Kennedy took Ms Thorne to his lawyers and told her she had to sign a prenuptial agreement. He told her if she did not, the wedding would not go ahead.
By this time Ms Thorne’s parents and sister had flown to Australia from Eastern Europe. Guests had been invited to the wedding. The wedding dress had been made and the wedding reception had been booked.
On 20 September, Mr Kennedy took Ms Thorne to see an independent lawyer for independent legal advice about the agreement.
The independent lawyer told Ms Thorne that it was the worst agreement she had seen and that she should not sign it. Ms Thorne said she would sign it.
Some amendments were made to the agreement at the request of the independent lawyer.
The agreement was signed by Ms Thorne on 26 September 2007, 4 days before the wedding, and against the advice of the independent lawyer. They married on 30 September 2007.
The agreement required the parties to sign another agreement in almost identical terms after the wedding. Ms Thorne was again advised by the independent lawyer not to sign the second agreement. She ignored that advice and signed it on 5 November 2007.
The parties separated on 16 June 2011 almost 4 years after they married.
Under the terms of the agreement, Ms Thorne received $50,000.
She commenced proceedings in April 2012 to set the agreement aside. A trial commenced in May 2014 but Mr Kennedy died during the trial. The case was continued by his executors.
The trial judge’s decision was that the agreement should be set aside.

The trial judge’s decision was that Ms Thorne’s situation was one where she was subject to undue influence.

The Judge’s Decision On Binding Financial Agreements
To quote the judge directly:

She was in Australia only in furtherance of their relationship. She had left behind her life and minimal possessions…She brought no assets of substance to the relationship. If the relationship ended, she would have nothing. No job, no visa, no home, no place, no community. The consequences of the relationship being at an end would have been significant and serious consequences to Ms Thorne. She would not be entitled to remain in Australia and she had nothing to return to anywhere else in the world. Every bargaining chip and every power was in Mr Kennedy’s hands. Either the document as it was, was signed, or the relationship was at an end. The Husband made that clear.”

As to the second agreement, the judge held that it was simply a continuation of the first – “the marriage would be at an end before it was begun if it was not signed.”

The law has always provided that contracts and agreements can be set aside in cases of undue influence, duress or unconscionable conduct.

When you look at those facts, it is not difficult to see why the trial judge thought that the agreement should be set aside and why the High Court decided unanimously that the trial judge had made the right decision.

Prenuptial agreements can be binding if:
Properly drawn up with provisions that are “fair”;
Parties have time, months not weeks or days, to properly consider the agreements and obtain legal advice. Binding Financial Agreements should not be prepared and signed under pressure of a wedding being just a few weeks or days away.
If you have more questions on binding financial agreements, please contact Leach Legal today.

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Pros of a Prenuptial Agreement

The pros of entering into a correctly drafted BFA include:

1. Certainty regarding the distribution of assets and liabilities if your relationship breaks down;

2. Assets owned prior to the relationship can be quarantined;

3. Minimal legal costs at the time of separation; and

4. Application of stamp duty and other tax concessions upon transfer of assets between the parties at the time of implementing the agreement.

Cons of a Prenuptial Agreement

The cons include:

1. The costs of preparing the agreement;

2. The fact that both parties must obtain independent legal advice; and

3. The complexity of preparing the agreement in consideration of children.

Drafting a Prenuptial Agreement

In order for a BFA to be binding it is imperative that you obtain independent legal advice and ensure the document has been correctly drafted under the Family Law Act. In certain circumstances, particularly when couples are older, already have children and have substantial assets or income the benefits of a BFA can far outweigh the risks. However, failure to obtain the right legal advice can result in an agreement that is not worth the paper it is written on.

If you would like more information on prenuptial agreements or would like to have one drafted, please call us for a free, 15 minute chat.

The post Do The Benefits Of A Prenuptial Agreement Outweigh The Risks? appeared first on Leach Legal.

Couples can enter into a BFA when they are contemplating marriage or cohabitation (commonly known as a “pre-nuptial agreement”), during the relationship, or following separation. The focus of this article is on “pre-nuptial” agreements.

A BFA can be signed before, during or after marriage or a de facto relationship, meaning that even if you have already married or moved in together, you can still sign a “pre-nuptial” style agreement.

They can be entered into by same-sex or heterosexual couples. Third parties, such as parents who loan money to the couple, can also be a party to the BFA.

They can deal with how the couple’s finances will be dealt with in the event of separation, along with maintenance both during and after the relationship, and any ancillary matters.

A BFA can be a very useful legal resource for couples who wish to promote harmony between them during their relationship and if they separate. There are very stringent legal requirements surrounding BFA’s, the most important being that each party must receive comprehensive legal advice before signing.

Like a marriage, a BFA is an agreement which is both serious and binding, and which must be voluntarily entered into. BFAs are not for every couple, and should not be entered into lightly. Below are some indicators that a BFA may be right for you:

• You wish to avoid court proceedings and associated legal fees in the event of separation.
• You or your partner have children from a previous relationship and you wish to ensure that your assets are protected for their future.
• You or your partner will be bringing a large asset base into the relationship which you wish to protect or quarantine in the event of separation.
• You or your partner are entering the relationship with a large amount of debt that you do not wish the other party to become responsible for.
• You or your partner are engaged in business ventures and you wish to protect your assets in case those business ventures fail.
• You and your partner have had mature and open discussions about finances, and have reached an agreement as to how you will handle your household finances.
• You are comfortable with the agreement reached, and have not been subjected to duress or threats if you do not sign.
• You have fully disclosed your financial position to your partner, and are confident that they have done the same.

There are both advantages and disadvantages to signing a BFA, and there is no “one size fits all” approach. Each BFA must be tailored to meet the specific needs of each particular relationship.

Sometimes it can be difficult to start a discussion with your partner about finances. Many couples attend pre-martial or pre-relationship counselling together as a means of opening the lines of communication. Organisations such as Relationships Australia and private service providers can provide counselling to assist couples with these discussions.

For more information and to find out whether a BFA may be suitable for you, please call Leach Legal on 08 9486 9733 for a free 15 minute telephone consultation with one of our experienced lawyers.

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