Binding Financial Agreements
Binding Financial Agreements (known as a BFA or sometimes a Pre-nub where done during a relationship) is a legal agreement made between parties before, during a relationship or marriage or after separation of two parties.
Where a Binding Financial Agreement is done during the relationship, it sets out the financial arrangements that are intended to happen if the relationship comes to an end. This is quite a difficult and complex type of agreement because you are essentially trying to ‘crystal ball’ what the assets will be and the circumstances of the parties at the end of the relationship. This is why, where a Binding Financial Agreement is done during a relationship, it is extremely important that it is updated regularly to reflect the current assets and each party’s financial and life circumstances (e.g. if a party stops working or if the parties have children together).
Where a Binding Financial Agreement is done after separation, it sets out how the assets, liabilities and superannuation in existence at that time, are divided. It is more common, and usually better to do a consent order to legally formalise the division of assets after separation. However, in some circumstances a Binding Financial Agreement will be better in the circumstances of your particular case. You should seek advice from an experienced family & divorce lawyer about which agreement is right for you.
If you have signed a Binding Financial Agreement during a relationship, this will generally determine the way your assets are divided after you separate and you lose your right to dispute the division of the assets set out in that Agreement. If there is a dispute in future about how the assets are to be divided between you and your former partner, in circumstances where you have a Binding Financial Agreement, in certain limited circumstances you may be able to seek that the Binding Financial Agreement be overturned in order to reclaim your right to seek a division of assets under the provisions of the Family Law Act 1975. You should seek advice about the specific circumstances of your case, if you believe you may have a good reason to seek that your Binding Financial Agreement be set aside.
Fixed Fee Binding Financial Agreement
We offer fixed fee Binding Financial Agreements. We recommend that you contact us to book a reduced rate initial consultation to obtain legal advice on your individual circumstances and we will provide you with a fixed fee quote having regard to the circumstances of your case.
What are the benefits of a Financial Agreement?
- To protect yourself against the other party making a claim against your assets in the future by legally formalising the division of your assets;
- You can agree to a division of assets which is not in line what what a Court would consider ‘Just & Equitable’ i.e. you ‘opt out’ of the Family Law definition of what is equitable, meaning a party can agree to receive less/more than what they would otherwise be entitled to under the Family Law Act;
- To avoid having to pay stamp duty;
- If you are in a relationship, you can pre-plan for the division of your assets. This gives you certainty about your future and less stress if/when the relationship breaks down about what will happen and who will get what;
- In circumstances where one party has brought in the majority of the assets, you will have some comfort that these assets will be protected in future from the other party (although we can never guarantee protection of your assets 100% through a Binding Financial Agreement, but it is the best way to protect yourself);
- You ensure that your estate is protected. All assets you own will be certain to pass pursuant to your will to your family as intended and you aren’t stripped from you by your former partner.
However, most of the above benefits can be secured by formalising your asset division through a consent order (save for if you are still in a relationship and want to pre-plan for separation). A consent order is the type of agreement we recommend to our client’s in 9 / 10 cases.
What are the disadvantages of a Binding Financial Agreement?
A Binding Financial Agreement is not signed off by a court and it is not scrutinised by anyone to ensure it is fair. A Binding Financial Agreement done during a relationship (prenuptial agreement) needs to be updated frequently if circumstances change, to ensure your agreement remains binding and enforceable. Whilst a Binding Financial Agreement is the best way to pre-plan for separation and protection of your assets, there are no guarantees that a Binding Financial Agreement will protect you if you separate. Binding Financial Agreements can therefore be more costly if they are not done right.
When is your Binding Financial Agreement enforceable?
A Binding Financial Agreement must be signed by a solicitor for each party who has given them independent legal advice in relation to the effect of the agreement and the advantages and disadvantages of the agreement. Only once this certificate has been signed, as well as a separation declaration, does the agreement become legally binding and enforceable.
The agreement must still be served on the superannuation fund for a superannuation split to take place, in a similar manner to a consent order agreement.
It is important to note that you cannot do a Binding Financial Agreement that involves a superannuation split, if the parties have not been separated for 12 months.
Can you terminate a Binding Financial Agreement?
A Binding Financial Agreement can be terminated by agreement between the parties. The termination of the Binding Financial Agreement must satisfy the same requirements of the original agreement, in that the termination agreement must be signed by both parties, each party must be provided with legal advice about the effect of the termination agreement and the advantages and disadvantages of terminating the agreement, and each party must receive a signed statement from their lawyer who gave them this advice.
A Binding Financial Agreement can be terminated by the parties entering into a new financial agreement that terminates the first agreement or if the parties draft an agreement called a termination agreement.
You should seek legal advice about your specific circumstances if you are wanting to terminate a binding financial agreement, as there are a number of facts to consider as to when a termination agreement becomes legally binding.
Effect of Binding Financial Agreement’s upon the death of either party
A binding financial agreement will continue to operate if a party to the agreement dies. It operates in favour of and is binding on the legal representative of that party.
The legal representative of a deceased party can then decide either enforce the BFA or apply to have the BFA set aside after the death of a party.
Want more information?
Contact us and book a reduced rate consultation to obtain advice in relation to your specific circumstances, as to whether or not a Binding Financial Agreement or a Consent order is right for you.
For more information on Consent Orders versus Binding Financial Agreements, click the link to view Courtney’s helpful explanation video.
We can also help prepare a Prenuptial Binding Financial Agreement to help to protect you from having to divide your assets with your partner, should you separate in future.