Should You Create a Binding Financial Agreement Before Living Together?
When two parties decide to live together for the foreseeable future, they should go into this type of situation with their eyes wide open. Both of them need to understand the legal and financial ramifications and, in an ideal world, they should make a formal agreement that will be valid in the event of any issue. This is particularly important when one or both of the individuals may have sizeable assets in their own name at the outset, and in this case, they should think about forming a binding financial agreement. What is this?
Legally Binding
A binding financial agreement is a legal document that sets out in detail how individual property should be treated during, and potentially after such a relationship. It should be based on mutual understanding and agreement and will be enforceable should the union end in acrimony.
Division of Assets
Both parties must understand the implications, and the document should never be signed under duress. In fact, if it can be proven that this was the case or that the agreement was entered into for a fraudulent reason, then it may be deemed invalid by a court of law.
For example, if one party has sizeable assets but the other does not, then they may agree that those assets would remain the property of the initial owner in the event of a breakup. This document would then have precedence over any potential lawsuit that may seek to divide the property into two.
Accurate Formation
As you can imagine, it is very important to draft such a document properly and with due deference to the principles of law. Otherwise, a solicitor may pick holes in the document if the relationship were to end in acrimony and one party would like to overturn the contract.
Moving Forward
If you are thinking about drafting a binding financial agreement, then you should talk this through clearly with the other party so that you both agree on the terms and conditions. You should also bring in a solicitor at the earliest opportunity to provide you with advice as you draft up the contract between you.
Proceeding With Caution
Remember, a family law court will often divide property equally in the event of a dispute and in the absence of any binding financial agreement. This is why it is so important to approach this correctly, to get the proper advice and to proceed with caution.
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