A Binding Financial Agreement (BFA) is a type of agreement that allows you and the other party to have greater control over your own property settlement before, during and/or after separation or divorce, without intervention from the court.
A Financial Agreement sets out what the parties agree will happen with their property.
Financial Agreements remove the power of the courts to become involved in dividing property or ongoing maintenance claims, including spousal maintenance. This means that the terms of the Financial Agreement do not necessarily need to be ‘fair and reasonable’ and do not have to divide property in a way that conforms to the usual family law principles.
Financial Agreements must comply with the requirements and formalities specified under the Family Law Act 1975 (Cth), and if done correctly, parties can enter into and make arrangements to formalise that agreement in a way that best suits their circumstances.
A Financial Agreement can be made before entering a relationship, during the relationship or after the relationship has ended.
You might know of these kinds of agreements as ‘pre-nups’, but Financial Agreements can be entered into at any point in the relationship – not just before marriage. They can even be entered into if the parties have no intention of ever marrying. Financial Agreements can be entered by both married and de facto couples.
It is important to note that when your circumstances change, whether this be by having children, a change in assets, a change in care needs of the parties or other notable changes in circumstances, it is prudent to consider renewing your Financial Agreement to reflect these changes. This is because a significant change that results in the Financial Agreement having the effect of causing one of the parties (or child of the parties) financial hardship, may be grounds to invalidate the agreement.
For a Financial Agreement to be legally binding, it must comply with strict formalities. Before signing the agreement, parties must receive independent legal advice from a legal practitioner about:
Parties cannot use the same lawyer to obtain legal advice about a Financial Agreement.
Either before or after signing the agreement, each party is given a signed statement of independent advice by the legal practitioner that states that advice was provided to that party. The parties will also usually sign respective acknowledgements of this legal advice, and these will be annexed to the Financial Agreement. This is done to try and ensure that the Financial Agreement cannot be set aside (or invalidated) later down the track due to insufficient legal advice.
Although a benefit of a Financial Agreement is that you and the other party can reach whatever agreement you want, both parties will still be advised whether the agreement is fair, reasonable and appropriate in the circumstances, both now and in the future.
A Financial Agreement can be terminated in two ways:
For de facto couples, any Financial Agreement they have entered will terminate if they later marry.
The effect of a Financial Agreement or Termination Agreement (and whether they are valid and enforceable) are matters determined by the court.
A court can set aside a Financial Agreement if:
If the Financial Agreement is set aside due to one of the above circumstances, the court will have jurisdiction to determine the entitlements of the parties. This is why it is so important to ensure that you are being advised correctly and that your Financial Agreement complies with the strict requirements to be legally binding.
Financial Agreements can range from a simple agreement to a complex agreement depending on the parties’ assets and the agreement reached. Each agreement must specifically reflect the parties’ unique circumstances and be drafted carefully to ensure compliance with the law.
Contact us to discuss your circumstances and to determine the best way to formalise your property agreement.