All about Binding Financial Agreements

What is a Binding Financial Agreement?

A Binding Financial Agreement (BFA) is a legally binding document under Australian family law.

Sometimes referred to as a prenuptial agreement or prenup, a BFA allows couples to determine how their assets, liabilities, and financial resources will be divided in the event of a breakdown of their relationship.

Here’s a comprehensive guide to understanding and creating a BFA in Australia.

Understanding Binding Financial Agreements

A Binding Financial Agreement is a legal document that formalises financial arrangements between parties who are contemplating being in a relationship (de facto or married), or who are in a relationship or who are separated.

A BFA can cover property, finances, spousal maintenance, and any other financial matters.

Purpose of a Binding Financial Agreement

BFAs are primarily used to protect assets, define financial expectations, and avoid lengthy court proceedings in the event of separation or divorce.

BFAs are most often used to quarantine assets that are owned before the relationship. Popular media has reported a dramatic increase in the number of people seeking a prenup in recent times.

When to use a Binding Financial Agreement

BFAs can be entered into before a de facto relationship or marriage, during the relationship or after separation.

Legislation

Binding Financial Agreements are governed under the Family Law Act 1975 (Cth), specifically under sections 90B-90KA for married couples and 90UA-90UN for de facto couples.

Requirements for a Binding Financial Agreement

Formal requirements:

• Must be in writing.
• Signed by all parties.
• Each party must receive independent legal advice before signing.
• Lawyers must sign a certificate confirming advice was provided.

Content requirements:

• Clearly identifies the parties involved.
• Details of assets, liabilities, and financial resources at the time of agreement.
• How assets will be divided in the event of separation or divorce.
• Whether spousal maintenance will be paid and under what terms.

The process of creating a Binding Financial Agreement

Initial discussion: Parties should discuss and agree on the terms of the agreement before seeking legal advice.

Drafting the BFA: One of the parties’ lawyers drafts the BFA based on the parties’ agreed terms.

Independent legal advice: Each party must consult with a separate family lawyer who will explain the implications of the agreement, advise on its fairness, and sign a certificate confirming advice was given.

Signing and execution: Once both parties are satisfied with the terms, the agreement is signed and dated by all parties and their lawyers.

Enforceability and validity of BFAs

Enforceability: For a BFA to be enforceable, it must meet all formal requirements, including independent legal advice prior to signing.

Setting aside: The court can set aside a BFA if it is found to be invalid, obtained under duress, fraud, or if circumstances have changed significantly that make it impracticable for the BFA to be carried out or which would cause a child of the marriage to suffer hardship.