What is a Binding Financial Agreement

Financial Agreements

While most people enter a relationship with the expectation that it will last their lifetime, the effects of time and unforeseen circumstances can unfortunately leave that expectation unfulfilled. No matter your circumstances, it is important to prepare for your future, and this includes deciding how your assets and finances should be divided in the unfortunate event that you and your partner separate.

Alternatively, if you and your partner have already separated, a financial agreement can be a useful tool to finalise the terms of your property settlement, including whether (and if so, how much) Spousal Maintenance might be payable by one party to another. Should you reach a property settlement that sits beyond the range of your likely legal entitlements, a financial agreement can also help you formalise your agreement without requiring the Court’s approval.

 What is a Binding Financial Agreement?

A financial agreement, known also as a Binding Financial Agreement (or “BFA”) is a contract between you and your partner (whether past, present or future) which dictate show your assets are to be split following separation.

A BFA can be entered into:

·        Before a marriage or a de facto relationship begins, in which case it is often referred to as a “pre-nuptial agreement” or “pre-nup”;

·        During a marriage or de facto relationship; or

·        After the parties to the relationship have separated, in which case it is often referred to as a “post-nuptial agreement or “post-nup”.

Because a BFA allows the parties to oust the Court’s jurisdiction in determining what is just and equitable between them—in other words, because the parties are choosing to disregard their likely legal entitlements—a BFA is subject to astringent set of legislative requirements. Should a BFA fail to meet any of these criteria, it can be challenged in litigation and ultimately overturned by the Court.

What makes a BFA binding?

In order to be legally enforceable, a BFA must meet all of the following requirements:

• The agreement must be signed by all parties;
• Before signing the agreement, each party was provided with independent legal advice from a lawyer about the effect of the BFA on their rights and about the advantages and disadvantages of entering into the BFA;
• Each party must obtain (and give to the other party) a certificate signed by their lawyer confirming that the party received the legal advice detailed above; and
• The agreement must not have been terminated by the parties or overturned by the Court.

As a BFA isa contract, it is subject to the same laws and equitable principals that apply to contracts more generally. For the purposes of family law, this means that a BFA will not be upheld in the event there has been duress or unconscionable conduct by a party. Importantly, the agreement must not be executed too close to the date of the parties’ impending marriage, as the pressure of going through with the wedding can be seen by the Court as causing duress. The Court has also found that in circumstances where one party threatens not to marry the other unless that other party executes a BFA, the agreement should be set aside due to duress.

Why should I choose a BFA over consent orders?

Consent orders are another way that parties can formalise the terms of their property settlement. Consent orders are often less expensive than a BFA, as they tend to require less drafting and do not require the parties to obtain legal advice. On the other hand, there are situations where consent orders cannot be used and the parties must execute a BFA.

These include:

• Where the parties want to quarantine particular assets, such as property they owned prior to the relationship, from being divided pursuant to a property settlement;
• Where the parties have not yet separated—noting that the jurisdiction of the Court to make consent orders is triggered by the parties’ separation, so there is no “pre-nup” equivalent for consent orders;
• Where the agreement reached by the parties departs significantly from the irrespective legal entitlements and is therefore unlikely to be approved by the Court;
• Where the parties want to make provisions for the payment of [hyperlink to Spousal Maintenance page] Spousal Maintenance [/hyperlink]or, alternatively, ensure that no Spousal Maintenance will be payable—noting that consent orders cannot deal with this issue;

How Duffy & Simon can help

As each party is required to obtain independent legal advice prior to executing a BFA, there is obvious scope for expert legal assistance in this area. Whether you are looking to have a BFA drafted or you have been provided with a draft BFA by your ex-partner’s lawyer, our knowledgeable team can ensure that the agreement is drafted properly and in accordance with the terms of your settlement, as you understand them. With years of experience drafting and reviewing BFAs, our family lawyers are intimately familiar with the workings of these documents and can help you avoid a catastrophic situation where you later discover your agreement is invalid.

We can also assist you with the logistics of carrying out settlement according to the terms of the BFA, including transferring property titles, dealing with interests in partnerships, family trusts and companies (including resignations and winding up), splitting and rolling over superannuation entitlements, and negotiating the division and collection of personal items.

Additionally, our Wills and Estates team can help you amend the provisions of your Will to ensure there is no clash between the terms of your Will and your BFA. With dedicated lawyers across a broad range of expertise, Duffy & Simon is your one-stop shop for all things pertaining to your property settlement.

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