Binding financial agreements are documents that allow spouses or de facto partners to divide up their property and finances in the event of separation. They are recognised under Section 90B & 90C of the Australian Family Law Act.
Binding Financial Agreements are known by many names, including financial agreements, prenups, postnups, cohabitation agreements and BFAS. In most cases, they are legally binding, as long as the right steps are taken in preparing and drafting the agreement.
What are the benefits of getting a Binding Financial Agreement?
BFA’s offer a range of benefits to couples, including:
Making Choices About Their Own Future
They can choose how they want their assets and finances split in the event of a separation, and they can have peace of mind that they won’t need to work things out amidst the stresses of a breakup.
Avoiding Conflict & Stressful Legal Battles
rather than engaging in arguments, mediation and court battles after separation occurs. They tend to provide some certainty to couples.
Potential Cost Savings – Or Peace Of Mind
The time and money invested in drafting a BFA is usually far less than what a couple might expect to expend if they had to go to court to seek property orders to divide their financial resources. In many cases, couples stay together, but in that case, it’s a small investment that provides long-term peace of mind.
Flexibility
If financial arrangements are dealt with when a relationship ends, it’s always possible for the matter to end up in court. Consent orders and informal agreements are other options in family law, and consent orders require the court’s stamp of approval. For this to happen, the Judge must be satisfied that these arrangements are fair and equitable. BFA’s allow couples to deal with their assets in a way that the court might not necessarily think is just and equitable.
No Need For Court Involvement
The BFA does not need to be signed off or “approved” by the court before it is executed, and usually, parties do not involve the court unless one of them seeks to enforce the terms of the BFA or challenge its validity.
Privacy
The terms of a BFA are usually confidential, which allows couples to retain their privacy rather than having their personal and financial details on a permanent court register. In some cases, a BFA may be involved in future court proceedings, which would mean that the BFA may be non-confidential at that stage, but this generally only occurs in a very limited number of matters.
What types of Binding Financial Agreements exist in Australian family law?
There are several types of BFA’s, and these are largely based on the time that the parties enter into the BFA.
The types of BFA’s are:
- Pre-marriage BFA’s (often referred to as pre-nups).
- Pre-de facto BFAS, where the parties do not intend to marry, are like a prenup above, but they are entered into before a de facto relationship commences. These BFAS are rarer, but they are sometimes used.
- BFAs entered into during a marriage without separation– effectively pre-empting what the parties will do with their assets if they do separate.
- BFAs entered into during a de facto relationship without separation.
- BFAs entered into after a separation but before a divorce. They are often used while parties are awaiting the twelve-month time period between their separation and filing for a divorce to undertake a property settlement.
- BFAs are entered into after divorce. They are commonly used when parties are undertaking property settlement negotiations and settlement before the 12-month time limit for property settlement expires or after the time limit expires.
- BFAs entered into after the de facto partners separate.
- BFAs to terminate an existing financial agreement, which are known as a termination agreement.
A properly drafted BFA ensures that both parties understand and agree to their financial rights and responsibilities.
What can BFAs cover?
A Binding Financial Agreement (BFA) is a private legal contract made under the Family Law Act 1975 that allows couples to set out how their property, finances and liabilities will be managed if their relationship ends.
These agreements can be entered into before, during or after a marriage or de facto relationship. They provide greater certainty by helping avoid disputes and lengthy court proceedings if a relationship breaks down.
A BFA can cover matters such as:
- Division of property and real estate
- Allocation of superannuation interests
- Management of personal debts and joint liabilities
- Ownership and control of businesses, trusts, or investments
- Financial support such as spousal maintenance (whether it will be paid, and if so, how much)
- Treatment of future inheritances or gifts
- Protection of assets acquired before or during the relationship
While BFAs do not generally deal with parenting arrangements or child support (which are managed under separate laws), they remain a powerful tool for couples seeking to safeguard their financial future. To be valid, each party must receive independent legal advice, and the agreement must comply with strict legal standards.
What are the legislative requirements for legally binding agreements?
There are different legislative requirements for each type of BFA, and it is usually best for those considering entering into a BFA to approach a lawyer to determine which BFA is right for them. It is important for parties to be aware that though they may be able to draft the BFA themselves (this is not advised due to the complexity of BFA’s and the various legislative requirements for each) they will need to each obtain their own, separate, independent legal advice about the advantages and disadvantages of entering into the BFA.
Can BFAS be changed, and if so, how?
Yes, Binding Financial Agreements (BFAS) can be changed, but only through formal legal processes that meet the requirements of the Family Law Act 1975. Because BFAs are binding contracts, they cannot be altered informally; any changes must be made correctly to remain enforceable. If circumstances change or both parties agree to update the terms, a new agreement or formal termination may be necessary.
One option is for both parties to enter into a new Binding Financial Agreement that replaces the original. This new agreement must meet all legal requirements, including that both parties receive independent legal advice and sign the agreement with legal certificates confirming they understand the implications. Alternatively, a BFA can be ended through a Termination Agreement, which also requires legal advice and must be signed by both parties. Without these formal steps, any amendments or verbal agreements will not be legally valid or recognised by the courts.
What are the steps to get a BFA?
Getting a Binding Financial Agreement (BFA) involves several key steps to ensure it is legally valid and enforceable. It’s important that both individuals are open and transparent, fully disclosing their assets, liabilities, income, and any other relevant financial details.
Once an agreement is drafted, usually with the help of a family lawyer, each party must receive independent legal advice from a separate lawyer. This advice must cover the advantages and disadvantages of the agreement and its effect on their rights. Both parties then sign the BFA, and their lawyers provide signed certificates confirming that legal advice was given. With these steps complete, the agreement becomes legally binding and can be used to avoid future disputes or court proceedings in the event of separation.
For more information about Binding Financial Agreements and whether they might be right for you, why not book a 15-minute discovery call with one of our divorce and de facto separation specialists? Alternatively, send us a message and we will answer your questions!
