Family law matters and commercial law are often viewed as separate areas. However, almost every modern family law matter is underpinned by complex financial, corporate, and tax considerations that can significantly affect outcomes for separating couples and families. For clients and practitioners, it is important to understand this commercial intersection to protect your client’s wealth, manage risk, and achieve fair settlements.
How does commercial law come into family law matters?
In Australia, family law is not a standalone field of practice. Alongside the Family Law Act 1975, family law practitioners routinely engage with corporate structures, trust law, and tax regimes, Assets in a property pool often include companies, discretionary trusts, inter-generational wealth structures, and overseas interests. In practice, this often means tracing assets, dealing with shareholder and loan accounts, and testing whether certain assets form part of the divisible pool, or are better classified as financial resources.
In these matters, collaboration is essential. Working alongside accountants, financial advisers, business valuers, tax specialists, and commercial lawyers will ensure that both the legal and commercial aspects of a settlement are properly understood and addressed.
Binding Financial Agreements:
Binding Financial Agreements (BFAs) are an important tool for clients to protect assets from future family law claims. Colloquially referred to as “prenups,” BFAs can be entered into before marriage or de facto relationship begins, during the relationship, or following separation. When drafted properly, they allow parties to quarantine specific assets, from inheritances, family businesses, or substantial wealth acquired prior to the relationship, and set out how property will be divided in the event of a relationship breakdown. BFAs can also deal with spousal maintenance and can prevent future court applications about property settlement or maintenance.
That being said, BFAs are highly technical. To be enforceable, each party must receive independent legal advice about the effect of the agreement and the advantages and disadvantages of entering it. They must also be carefully drafted to anticipate foreseeable changes in circumstances. Crucially, these requirements are not just formalities. Inadequate drafting or non-compliance can result in an agreement being vulnerable to challenge by the other side. Just as importantly, BFAs sit alongside commercial and estate planning. A sophisticated trust or corporate structure will not, on its own, protect assets from family law claims where a party retains significant control – which is why early advice is crucial.
The division of property and financial resources:
When a relationship ends, the court applies a process to determine how property should be divided, considering the nature and value of the asset pool, the contributions of each party (whether they be financial or non‑financial) and their respective future needs. In this context, the distinction between “property” and “financial resources” becomes critical. Assets such as real estate, bank accounts, companies and superannuation generally form part of the divisible pool, whereas future interests may be treated as financial resources. While the court cannot divide a financial resource directly, it can adjust the overall percentage split considering one party’s access to that resource.
Underpinning all of this is the duty of full and frank financial disclosure. Parties must disclose their financial circumstances, including interests in companies and trusts, business records, tax returns, superannuation, liabilities and any inheritances received or expected to receive. This duty is ongoing and now sits within the Family Law Act. Failure to disclose can result in cost orders, reduced entitlements and, in serious cases, orders being revisited or even set aside.
Trusts, inheritances and family loans
Family trusts are a recurring feature of property settlements. Clients often assume that assets held in a family trust are automatically protected, only to learn that the court will look closely at who actually controls the trust. Where a party is the trustee and appointor with broad discretionary powers, trust assets are more likely to be treated as that party’s property. Where a party is merely a discretionary beneficiary with no control but a history of distributions, their interest may be treated as a financial resource. In either scenario, full disclosure of the trust deed, financial statements, and distribution history is required.
Similarly, inheritances and advances from family members can be key considerations in settlement negotiations. The timing of an inheritance, such as whether it is received before, during or after the relationship, and before or after separation, can significantly influence how it is treated. In many cases, an inheritance is included in the asset pool but recognised as a contribution by the recipient; in others, it is treated more as a financial resource. For families wishing to protect inter‑generational wealth, combining BFAs, formal loan documentation, and consistent estate planning is often the most effective strategy.
What this means for our clients and referrers
For our clients, the commercial aspect of family law means that early, tailored advice is crucial – whether you are entering a new relationship or managing a separation. At Nicholes Family Lawyers, we recognise that couples who are separating have to deal with not only emotional issues but financial consequences. With careful planning, clear documentation, and informed legal advice, it is possible to navigate these potentially difficult transactions in a way that protects assets, reduces conflict, and supports successful outcomes.