What is a Binding Financial Agreement?
A Binding Financial Agreement (BFA), colloquially known as a “prenuptial agreement”, is a legally binding document agreed upon and signed by two parties outside of court proceedings. BFAs effectively allow parties to contract out of the general provisions of the Family Law Act 1975 (Cth) regarding property and financial matters, enabling parties to quarantine their assets from the asset pool available for division in the event of a breakdown of a relationship or marriage.
Why enter a BFA?
BFAs can provide clarity, certainty and peace of mind by allowing couples to make their own financial arrangements rather than leaving financial outcomes to be determined by a court.
In some cases, we have clients who come to see us when they are about to get married or about to live together in a de facto relationship and they are seeking to ensure that their assets are protected from any future family law claims. BFAs are the only available option to protect and quarantine assets.
Often the BFA will set out schedules of “separate assets” including inheritances of each party and “joint assets”. The separate assets are defined as such and can be protected in the case of a relationship breakdown.
When to enter into a BFA?
A BFA can be entered into at various stages of a relationship. Couples may choose to formalise such an agreement before marriage, or commencing a de facto relationship, at the start of the relationship, or at any time during the relationship or marriage. A BFA can also be made after separation or divorce to finalise financial matters and avoid the need for court proceedings.
BFAs are available not only to married couples, but also de facto couples as well as same sex couples.
Relevant major life decisions where you should consider a binding financial agreement include, but are not limited to:
- Before moving in together
- Before buying property together
- Before marriage
- During marriage, especially if one of you has significant assets prior to entering the marriage
- If you are in a more superior financial position
- If you are expecting an inheritance or gift you wish to quarantine;
- Whether you intend to have children
Requirements
There are certain requirements that must first be met before a BFA is made binding.
Before signing the agreement, both parties must have sought independent legal advice from a legal practitioner about the effect of the BFA on the rights of that parties, as well as the advantages and disadvantages, at the time the advice was provided, to the part making the BFA.
Each party is provided with a signed statement by their legal practitioner confirming the advice was given. Each party or their lawyer is also given a copy of the signed statement by the lawyer for the other party.
Thereafter, both parties must sign the BFA. The agreement will remain binding unless it is terminated or set aside by a Court.
How Nicholes can help
Strict legal requirements apply to the preparation and execution of a BFA in order for it to be legally enforceable.
At Nicholes Family Lawyers, our team has expertise in preparing BFA’s and providing expert advice to help you navigate this legally complex area.
Please contact our office on (03) 9670 4122 to arrange an initial consultation.