Important Things to Know about Binding Financial Agreements
10 August 2023
Author: Phoebe Smillie - Our People
A Binding Financial Agreement, colloquially known as a ‘pre-nup’ or ‘post-nup’ is an agreement which formalises how a couple’s assets, liabilities, and superannuation will be divided in the event of a marriage or relationship breakdown. Once parties enter into a Binding Financial Agreement, they essentially give up their rights under the Family Law Act for the Federal Circuit and Family Court of Australia to determine their property settlement.
We list important things to know about Binding Financial Agreements below:
When can you enter a Binding Financial Agreement?
Couples can enter into a BFA:
- Before marriage / de facto relationship;
- During the marriage / de facto relationship; or
- After the marriage / de facto relationship.
What does a Binding Financial Agreement usually deal with?
A Binding Financial Agreement can ‘cover the field’ and address all aspects of the financial relationship between the parties, such as:
- The way in which property/assets are to be divided between parties in the event of a separation.
- The financial support of one party by the other (i.e. spousal or de facto maintenance).
- The division of superannuation.
- Any other necessary financial issues.
What are the benefits of a Binding Financial Agreement?
The benefits of a Binding Financial Agreement will depend on each individual relationship, however, generally speaking, some of the benefits can include the following:
- Binding Financial Agreements allows couples to agree in advance on a division of assets. After a relationship has broken down, the existence of a Binding Financial Agreement can reduce the emotional and financial stress of a separation without the need for costly and protracted litigation and/or negotiations.
- Binding Financial Agreements can provide a degree of certainty to the parties that their financial relationship is finalised.
- Binding Financial Agreements can provide comfort to people who want to protect pre-existing assets. This is particularly relevant when one person is in a financially superior position to the other. we often see matters where one party has accumulated assets prior to the commencement of a relationship without contribution from the other party and it is not to be unexpected that they wish to ensure those assets remain theirs upon separation.
- Binding Financial Agreements can dictate how joint property can be acquired, financially maintained and dealt with if separation occurs.
Is a Binding Financial Agreement binding?
There are certain requirements set out under the Family Law Act that Binding Financial Agreements need to meet to be binding. If the requirements are not met, then the Binding Financial Agreement can be void or set aside.
In summary, a Binding Financial Agreement is only binding, if:
- The agreement is in writing and signed by all parties.
- Before signing the agreement, each party was provided with independent legal advice from a legal practitioner about the effect of the agreement on their rights and about the advantages and disadvantages of the agreement at the time the advice was provided.
- Either before or after signing the agreement, each party was provided with a signed statement by the law stating the advice (referred to above) was provided to that party.
- The agreement has not been terminated or set aside by a Court.
- Includes a separation declaration (if applicable).
If the abovementioned procedural requirements are not strictly satisfied, the Court still has the power to find that the Binding Financial Agreement is binding, if it is satisfied that it would be unjust and inequitable if the Binding Financial Agreement was not binding.
When can a Binding Financial Agreement be set aside?
In certain circumstances, the Court has discretion to set aside a Binding Financial Agreement, such as:
- If there has been a failure to disclose relevant matters/assets.
- If the Binding Financial Agreement was obtained by fraud or duress.
- The Binding Financial Agreement.
Can Binding Financial Agreements be terminated?
Binding Financial Agreements can only be terminated by:
- Entering into a new Binding Financial Agreement which includes a provision providing that the other Binding Financial Agreement is terminated; or
- Drafting a Termination Agreement (noting you must receive independent legal advice before entering into a Termination Agreement).