How binding financial agreements work and why you need one
Talking about binding financial agreements may not always be sexy, but it should be.
If you’ve never heard of a binding financial agreement, it’s essentially Australia’s version of a prenuptial agreement (or postnuptial agreement). It is a document that outlines the assets and liabilities that individuals bring to a relationship and how they will be treated should the relationship break down. It can include things like cash, shares, property and mortgages.
Binding financial agreements can be beneficial for anyone who wants to protect their assets, regardless of whether they are legally married or in a de facto relationship. “It’s particularly helpful when there’s financial instability, for example when people have a lot of debt or a lot of money,” says financial therapist Jane Monica-Jones.
They may also be useful for blended families or people from cultures where financial aid to family members is common. People who want to preserve their inheritance or start a business may also consider this.
They can serve as a constructive tool to achieve clarity and financial security. It can help couples manage future disagreements respectfully. “It’s kind of an agreement to preserve the relationship,” says Monica-Jones.
“Of course we don’t want things to end. But it brings a level of psychological safety to our financial experience. It means we can be a little more open and clear.”
‘We must be kind, safe and lead with care. Psychological safety around money can often be very painful.’
Jane Monica-Jones, financial therapist
Talking to your partner about a binding financial agreement can be a simple or very complex conversation. Monica-Jones has been a financial therapist for 17 years, working with individuals to address all types of trauma related to their relationships, behavior and money. “I’m afraid of this too,” he says.
It is difficult to determine the exact number of binding financial agreements in Australia due to the lack of publicly available data. Approximately 15 percent of couples in the United States enter into a prenup. According to the 2022 survey.
So what is Monica-Jones’ advice on conversation? It is best to be prepared so that you can deliver the speech clearly and calmly.
“First you have to understand why this is important.” This could be anything from your personal values to financial responsibility to children from a previous partnership.
Another thing you should consider is whether you may or may not have disclosed your assets and liabilities; so you will need to do this first.
It is important to separate the financial logistics of a binding financial agreement from the emotional commitment of a relationship. You can make it clear to your partner: “This is not a reflection of my love or affection for you,” says Monica-Jones.
He recommends scheduling a private time to discuss a binding financial agreement in a private setting. Don’t just put this on your partner. Give them the opportunity to prepare and research, too.
And remember, you don’t have to make any decisions in one conversation. “It may take some time to get more information or contact the right attorneys.”
Be curious rather than defensive during your conversations. This goes for both parties.
“We must be kind, safe, and tread carefully. Psychological safety around money can often be very painful. Money is often defined by levels of safety, trust, and security; they are a physical experience, but they can also become an emotional experience.”
Chat when things are emotionally neutral. Don’t even think about being in the middle of any conflict.
If a couple is having difficulty sustaining these conversations, Monica-Jones suggests consulting with a professional. This could be a financial advisor, financial therapist, or family lawyer. If you’re bringing up a binding financial agreement and your partner is resistant or feeling overwhelmed, you can ask him or her to choose the type of professional with whom he or she would feel comfortable discussing it further.
Talk of binding financial agreements is common in Monica-Jones’ practice. “It can be difficult and uncomfortable, and it’s critical to understand that. But it can also be a really great part of healing some of the old things in our own experiences around safety, trust, and sense of belonging if done well,” she says.
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