Binding Financial Agreements provide a way for people to protect their assets before getting married or starting a defacto relationship, writes accredited family law specialist and TGB Partner Jane Miller.
Binding Financial Agreements provide a way for people to protect their assets before getting married or starting a defacto relationship, writes accredited family law specialist Jane Miller.
1. What is a Binding Financial Agreement (BFA)?
A BFA is a legal agreement between a couple who are entering a relationship, in a relationship or ending a relationship. It can be made by people who are married as well as de facto couples, including same sex.
A BFA sets out the division of the couple’s assets should they separate. The assets affected will include the assets owned by each individual at the start of the relationship, as well as any assets they acquire during their relationship. It can also address the amount of any maintenance to be paid by the primary breadwinner to the other person should the relationship end.
Each member of the couple must enter the BFA of their own free will and fully informed. For a BFA to be legal and binding, it must comply with the strict formalities set out in the Family Law Act. These formalities include full disclosure between the couple about their assets, debts and financial resources. Each party must receive independent legal advice about the BFA, and their separate lawyers must sign certificates confirming that particular advice was given to the couple, including the advantages and disadvantages of the BFA.
Primarily BFAs are used by couples at the start of their de facto relationship or marriage, often referred to as “pre-nuptial agreements”. In some instances couples want to enter into the BFA part way through their de facto relationship or marriage. This is usually because their financial circumstances have changed. BFAs are also sometimes prepared at the end of a relationship, in order to formalise an agreement for property settlement reached by the couple. However, an Application for a Consent Order made to the Family Court is generally preferential to a BFA in this scenario.
Although BFAs can be made before, during and after a relationship, this article will discuss the former two.
2. Who needs a BFA and why?
If you are contemplating marriage or starting a de facto relationship then you should think about preparing a BFA. This is especially the case if you have assets of value that you wish to protect if the relationship should end. BFAs are often contemplated when one party has assets exceeding the value of the other’s.
A BFA is also an option for those who want to avoid the potential costs, delays and uncertainty that can arise if your relationship ends, and a property settlement must be determined by the Family Law Courts. BFAs are often used by couples who have previously been divorced and experienced the stresses of a contested property settlement.
3. When should I enter into a BFA?
In the case of a couple planning to marry, a BFA should be entered into at least several months before the wedding date to ensure there is ample time and no pressure to prepare the document quickly. This is important if the detail of the document needs to be negotiated. The BFA can be entered after the wedding day, although this is not preferable as your spouse may not be willing to sign it once you are married.
For de facto couples, the BFA should be entered into before you start living together. Once again, you can enter the BFA once the de facto relationship has started, although this is not preferable as your partner may then refuse to sign it.
4. What if I decide against a BFA?
If your relationship ends and you do not have a legal BFA in place, then you and your former partner/spouse will need to negotiate a property settlement. If this cannot be done amicably, then you might need the Family Law Courts to determine this for you, as well as any entitlements to income payments to your former partner by way of spousal maintenance.
Unfortunately this process is often costly, lengthy and stressful. Finally, you may feel dissatisfied with the final division of assets, especially if you brought more assets to the relationship than your ex.
5. How do I get a BFA?
Your BFA must be prepared by a lawyer. Your lawyer can only act for you and will not allow your partner to be present during any appointments regarding the agreement. Your partner must receive advice about the agreement from another lawyer at a separate law firm. This ensures that the lawyers do not have a conflict of interest.
The first step towards a BFA is to discuss the matter with your partner. If your partner flatly refuses to enter a BFA, then you cannot proceed further with the process. Unfortunately in that scenario you will be forced to consider if you wish to proceed with the relationship without the BFA in place.
If your partner is open to entering a BFA, then make an appointment with your lawyer to discuss the terms of the document. Your lawyer will then prepare a draft BFA to be approved by you, and presented to your partner. Your partner will see his/her lawyer to receive advice about the document, and further discussion or negotiation may be required before the final BFA is prepared and signed.
To discuss Binding Financial Agreements or any other family law matter contact your nearest TGB office.