Family Law: What are Binding Financial Agreements and why it’s important to have one in place?
Couples who are looking to enter marriage or a de facto relationship may consider a Binding Financial Agreement (BFA) or also widely known as a ‘prenuptial agreement’ or ‘pre-nup’. Unfortunately, in the world we live in, relationships can breakdown and a BFA can help protect your assets and other financial costs. BFAs can be complicated, so it’s important to understand how they work and in what circumstances a Court can set aside a BFA.
What is a Binding Financial Agreement?
A Binding Financial Agreement (BFA) is a private contract governing property interests in the event of a breakdown of a marriage or a de facto relationship. Once couples enter into a BFA, they contract out of certain provisions of the Family Law Act 1975 (Cth) which enable the Court to determine property matters should the relationship breakdown.
Parties (couples) can enter into a BFA:
-Before getting married or before entering a de facto relationship;
-During marriage or during a de facto relationship;
-After breakdown of a de facto relationship;
-After breakdown of marriage but before filing for divorce; or
-After divorce but within 12-months.
A financial agreement is binding on the parties if, and only if:
-The agreement is in writing and signed by both parties.
-Before signing the agreement, each party is provided with independent legal advice from lawyers as to the effect on the rights of the parties and the advantages and disadvantages of the agreement.
-Before or after signing the agreement, each party is provided with a signed statement by the lawyer stating that advice was provided, and these statements are exchanged between the parties.
-The Agreement is not terminated or set aside by the Court.
There are limited circumstances in which a Court can set aside a BFA. The most common reasons are as follows:
-The agreement was obtained by fraud.
-The agreement was entered into to defraud or defeat a creditor.
-The agreement is unenforceable due to unconscionability (extremely unfair or unjust), duress or undue influence.
-Since making the agreement, a material change in circumstance occurred and as a result of the change, a party will suffer hardship if the agreement is not set aside.
Why is it important to have a BFA in place?
We always hope relationships last, but the harsh reality is that sometimes relationships breakdown.
If you are considering getting married or entering a de facto relationship, it is important that you protect your hard-earned assets and ensure that you (and your children) are financially secure should your relationship fail. Entering a BFA may save you from engaging in costly and time-consuming Court Litigation in the future.
Furthermore, if you and your partner have already separated but can agree on how your property is to be divided, a BFA may be a cost-effective way to settle your matter. When compared with other alternatives, like Consent Orders and Court Litigation, BFA’s are often quicker and cheaper.
It is important to keep in mind there are circumstances in which a Court can set aside a BFA. If you are considering a BFA, it’s essential you engage a competent and experienced family lawyer.
At Michael Benjamin & Associates, our family law team can draft and advise you on all aspects of your BFA to ensure that it is not set aside unnecessarily due to poor drafting or inaccurate advice.
Written by Chloe Rebbechi, Law Clerk, Michael Benjamin & Associates.
If you are considering a BFA, contact Michael Benjamin & Associates today here.