Documenting division of assets - before, during or after a defacto relationship or marriage
What is a Binding Financial Agreement?
A Binding Financial Agreement (BFA) states how your assets, financial resources and liabilities will be divided if your relationship breaks down, or has broken down. A BFA before a relationship breaks down is often referred to as a prenuptial agreement.
The Family Law Act (1975) is the relevant legislation dealing with BFA’s for married and
de facto couples, including same sex couples.
A BFA sets out how property will be divided between parties of a relationship taking into consideration the assets, debts and financial resources. This document allows parties to come to an agreement without needing to go to the Family Courts in order to formalise what they have decided to do with their property.
What matters are covered by a BFA?
The BFA deals with personal property, real estate, financial resources, spousal maintenance and superannuation matters.
When can a BFA be prepared?
A BFA can be prepared and signed before, during or after a marriage or de facto relationship.
How to make it legal and valid
It is important that your BFA is put together with careful legal advice to ensure that the agreement is not set aside by the court. There are strict legal requirements for making a valid BFA:
Each person must receive independent legal advice before signing the BFA
Legal advice must be obtained by a lawyer in the Australian jurisdiction
Each person must sign the BFA voluntarily
The BFA must be in writing
The BFA must contain each person’s complete disclosure (list all assets and liabilities)
If both parties have validly signed a BFA, the agreement will nearly always work.
Advantages of a BFA
Time and costs - by entering into a BFA, you will likely save the time and costs associated with a potential court hearing
Certainty - a BFA provides complete certainty on how your assets will be divided upon separation. A BFA removes any uncertainty which may exist by virtue of the discretionary power of the court
Finality – by formalising the division of property, each party will not have the ability to make any further claims on assets that may be subsequently acquired
Amicable separation – BFAs allow parties to separate more amicably, with no disagreements as to property division
Varying, terminating and setting aside a BFA
The BFA cannot be varied but it can be terminated by agreement between the parties.
Any termination agreement later made must also satisfy the same requirements and formalities referred to above that made it legal in the first place.
The court can set aside the BFA if:
The legal requirements listed above have not been met
The agreement was obtained by fraud (failure to disclose all relevant information)
The agreement is void, voidable or unenforceable on the basis of mistake, undue influence, duress, unconscionable conduct or uncertainty
The parties have a child which wasn’t previously mentioned in the BFA.
When you might consider a BFA and why?
A BFA can be prepared and signed:
before or during your marriage or defacto relationship Discussing a BFA with your partner whilst the relationship is happy and solid may seem awkward at first, but it is a very useful way to plan your future and provide certainty and clarity for you both when it comes to how your property will be divided if the worst-case scenario does occur. A BFA allows you to discuss these important matters with your partner in a calm environment with no animosity to make mutual decisions about your financial future.
upon the breakdown of a marriage or de facto relationship Preparing a valid BFA allows mutual agreement on exactly what each of you will get instead of going to court to avoid uncertainty waiting for a judicial officer to decide these maters for you, also avoiding long court proceedings that increase stress and add to the pressure you may already be under at this time.
If you decide to proceed with a BFA, you must seek legal advice specific to your personal circumstances to determine whether this type of agreement is right for you. These agreements are complex documents to prepare and must comply with strict legal requirements in order to be valid and enforceable.