A Binding Financial Agreement (BFA) is a legal contract that outlines the financial arrangements between parties in a relationship before, during or after marriage. In Australia, BFAs may also be referred to as pre-nuptial or post-nuptial agreements. These agreements can be used to define property division, spousal maintenance and other financial obligations in the event of separation or divorce.
BFAs can be legally binding and enforceable in Australia, so long as they meet certain requirements detailed in the Family Law Act 1975. To be considered valid, both parties must get independent legal advice.
There are fundamental legislative prerequisites that must also be complied with; including the requirement for parties to provide detailed financial disclosure. The agreement must also not contain any provisions that are considered illegal, such as provisions that would discriminate against a party or contravene public policy. If the BFA is not made in accordance with the technical requirements, the court can set it aside.
Can I void a binding financial agreement?
There are circumstances where a BFA may be overturned or declared void. This can occur if either party did not fully understand the terms of the agreement or if the agreement was entered into as a result of duress or undue influence.
For example, if one party was not given adequate time to seek independent legal advice before signing the agreement, or if they did not fully understand the financial consequences of the agreement, the agreement may be considered void. Additionally, if the agreement was entered into fraudulently, such as if one party provided false information or hid assets, the agreement may be declared void.
Can changes be made to a binding financial agreement?
Changes can be made to a BFA, but usually only if both parties agree to the changes in writing. The changes must be made in accordance with the legal requirements for BFAs and must not contain any provisions that are considered illegal.
What are the disadvantages of a binding financial agreement?
While BFAs can provide some clarity and certainty about financial arrangements in a relationship, there are also several disadvantages to consider.
Firstly, comprehensive BFAs can be expensive to prepare and require the involvement of lawyers. This can be a significant barrier for many couples, especially if they do not have significant assets or are in the early stages of their relationship.
BFAs also have the potential to lead to conflict, as one party may feel they’ve been disadvantaged by the terms of the agreement. This can create a sense of distrust and tension between couples, which can be difficult to overcome.
Finally, BFAs are only triggered in the event of separation or divorce. If a couple reconciles, the agreement may no longer be applicable, and the financial arrangements outlined in the agreement may need to be renegotiated. A BFA will also become void if the parties entered it on a de facto basis, then decide to marry later on.
What are the advantages of a binding financial agreement?
There are several advantages to having a BFA, including:
- Clarity and certainty: BFAs provide a clear and defined framework for financial arrangements in a relationship, which can provide peace of mind for both parties. This can help to prevent disputes and misunderstandings about financial obligations in the future.
- Protects assets: BFAs can be used to protect the assets of one or both parties, ensuring that property and assets are divided in a fair and agreed-upon manner in the event of separation or divorce.
- Avoids legal battles: In the absence of a BFA, disputes over property and financial arrangements can become lengthy and expensive legal battles. By having a BFA in place, couples can avoid the time, cost and stress of a court battle.
- Customisable: BFAs can be tailored to the specific needs and circumstances of a couple, taking into account individual financial circumstances, such as business interests, investment portfolios and property ownership.
Flexibility: BFAs can be updated as circumstances change, such as the acquisition of new assets, changes in financial circumstances or the birth of children. This allows for the agreement to remain relevant and reflective of the couple’s current circumstances.
While a BFA can provide a practical and effective solution for financial arrangements in a relationship, it’s important to note that they are not suitable for everyone, and couples must seek independent legal advice before entering into an agreement.
Greenhalgh Pickard’s family law solicitors