One of the questions we sometimes get asked by our clients is “do I need a Binding Financial Agreement?”.
To help you understand this topic better, in this blog we’ll cover:
- What a Binding Financial Agreement is
- Who can enter into a Binding Financial Agreement
- What a Binding Financial Agreement can cover
- How to work out if you need a Binding Financial Agreement
What Is A Binding Financial Agreement?
A Binding Financial Agreement (BFA) sets out what would happen to your finances (your own personal and all joint finances) in the event of a marriage or relationship breakdown. These terms are jointly agreed by the two parties involved, e.g. you and your spouse/ex-spouse or partner. It can be drawn up at any stage of the relationship – before, during, or even after the marriage or relationship has ended.
A Binding Financial Agreement is exactly that – BINDING! Both partners will have to appoint their own professional family lawyers, who will then draw up a draft agreement and present it to the other party. Once all the terms are agreed upon, the final BFA will be drawn up, and once signed by both parties, it becomes legally binding.
In the event of the relationship breaking down in the future, neither party can apply for any settlement that is contrary to the terms of the BFA. The good news though, is that as circumstances constantly change, the BFA can be amended, replaced or terminated at any stage thereafter, but that has to be mutually agreed.
Previously people referred to a BFA as a prenuptial agreement. Prenuptial agreements are an American concept and were only drawn up before the commencement of a marriage or a de facto relationship.Technically, prenuptial agreements do not exist in Australia.
Who Can Enter Into A Binding Financial Agreement?
Anyonewho is about to enter or already is in a marriage or a de facto relationship, including same-sex couples, can enter into a Binding Financial Agreement.
You can also enter into a BFA if your relationship has ended and you want to resolve your financial affairs.
What Can A Binding Financial Agreement Cover?
A Binding Financial Agreement can cover whatever the spouses or partners want it to cover. It can cover, the division of all assets, such as investments, properties, businesses, possible superannuation entitlements, spousal maintenance, gifts, inheritances and also debt. Children’s inheritances could also be catered for, particularly if one or both partners enter into a marriage or a de facto relationship with their own children from a previous relationship.
It is imperative, however, that all such assets be truthfully disclosed, as the Agreement could be nullified if, at a later stage, it is discovered that one partner has acted fraudulently by not or incorrectly disclosing the existence or correct value of an asset or a business interest.
Do You Need A Binding Financial Agreement?
There are numerous reasons for needing a Binding Financial Agreement. By having a mutually-agreed legal document in place, it will avoid any future disputes and disagreements with your spouse or partner in the event of a breakdown in your relationship.
The terms of the BFA will be exactly as agreed upon by both partners, and not by a Judge in Family Court. This will save you both in time, money and unnecessary stress that comes with all divorces and separations.
By keeping disagreements to a minimum, it will help to ensure you maintain a civil relationship with your spouse during and after the separation.
And then of course, a Binding Financial Agreement will give both partners peace of mind and a sense of security knowing their assets are fully protected exactly as they want them to be.
You could consider drawing up a Binding Financial Agreement if any of the following circumstances apply to you:
- You are in or entering a serious relationship
- You have recently separated from your partner or spouse
- You own your own real estate or have substantial other assets
- You have or likely to receive any significant gifts or inheritances from anybody or trust in future
- You have children from a previous relationship, you wish to protect
- You have not decided about how you want to divide your assets in the event of a separation
If any of the above circumstances apply to you, you could consider drawing up a Binding Financial Agreement to help protect your assets.
Get in touch with our family lawyers in Perth today – we can help you work out whether you need a Binding Financial Agreement and if so, get one drawn up and put in place for you.
