Binding Financial Agreements And Pre-Nuptial Agreements

A Binding Financial Agreement (“BFA”) is a private contract between the parties that sets out how their assets will be divided. BFAs are not approved by the Court, and as such, do not need to be ‘fair’. They do, however, have to meet strict legal requirements in order to be binding and enforceable, as if they were orders of the Court.

BFAs can be entered into at various stages of a relationship, including:

  1. Before marriage or prior to the commence of a de facto relationship (commonly referred to as a pre-nuptial agreement, or ‘prenup’);
  2. During a marriage or de facto relationship;
  3. After separation; and
  4. After divorce.

Purpose and Benefits of a Binding Financial Agreement

A BFA provides financial certainty and protection for both parties. Some key advantages include:
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Asset Protection

A BFA can safeguard assets owned prior to the relationship, including property, businesses, inheritances, and superannuation.

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Financial Autonomy

Couples can agree on the division of their assets without the Court’s intervention, and without having to ensure the outcome is ‘fair’.
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Avoiding Litigation

In the event of a separation, a BFA can prevent costly and time-consuming legal disputes.

Legal Requirements

For a BFA to be legally enforceable under the Family Law Act 1975, it must meet several strict legal requirements, including

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The agreement must be in writing. A verbal agreement is not sufficient.
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Each party to the agreement must receive independent legal advice prior to signing the agreement, about their rights, the advantages and disadvantages of the agreement for that party, and the effect of the agreement.
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Each party’s lawyer must sign a certificate confirming they provided the required advice to their client before their client signed the agreement.
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Both parties must sign the agreement.
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The agreement must otherwise comply with the relevant provisions of the Family Law Act (or it can be set aside, or declared invalid).

When Can a Binding Financial Agreement be Set Aside?

Although BFAs are designed to be legally binding, there are circumstances in which a court can set an agreement aside. These include:

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Where there has been fraud or misrepresentation (i.e. if one party fails to disclose relevant financial information).
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Where there has been unconscionable conduct (i.e. one party was pressured or unfairly influenced into signing).
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Where there has been a material change in circumstances since the agreement was signed (particularly concerning children), and enforcing the agreement would cause a party to suffer hardship.
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Where there has been non-compliance with the strict legal requirements outlined in the Family Law Act.

Should You Get a Binding Financial Agreement?

While BFAs are not mandatory, they can provide peace of mind and financial security, particularly in relationships where:

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One or both parties have significant pre-existing assets;
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One party has a business or family inheritance to protect;
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There is a significant income disparity between the parties; and/or
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One party has children from a previous relationship.

How a Family Lawyer Can Help

Given the complexity and legal requirements of BFAs, it is crucial to seek advice from a family lawyer who has experience with BFAs. A family lawyer can:

  • Draft a legally compliant BFA tailored to your specific needs;
  • Ensure full financial disclosure and fairness in the agreement (if fairness is what you’re looking to achieve – it’s not always with BFAs);
  • Provide independent legal advice to ensure you understand your rights, the advantages, disadvantages and effect of the agreement; and/or
  • Assist in reviewing or updating an existing BFA as your circumstances change.

Our team have extensive experience with Binding Financial Agreements, and can guide you through the process whilst ensuring your financial interests are protected. Call our office on 07 5556 6411 to schedule a free, no obligation initial consultation to discuss what you’re looking to achieve with a BFA, and how we can help.

Spencer Law Team Walking