What is a post-nuptial agreement (Binding Financial Agreement) and should married couples consider one?
A post-nuptial agreement, known in Australia as a Binding Financial Agreement (BFA), is a legally binding contract entered into after marriage that sets out how assets, liabilities and financial matters will be dealt with if the relationship ends. A properly drafted BFA can provide certainty, reduce the cost and stress of future disputes, and help avoid Family Court proceedings. However, BFAs may not suit every couple, particularly where future circumstances are uncertain, and they can be set aside in certain situations such as fraud, unconscionable conduct or significant changes in circumstances.
A post-nuptial agreement, known in Australia as a ‘Binding Financial Agreement’ (BFA), is the post-wedding day equivalent of the growingly prevalent pre-nuptial agreement couples may choose to enter to guarantee certainty following a martial breakdown or death of a spouse.
What is a post-nuptial BFA?
Under the Family Law Act 1975 (the Act), a postnuptial agreement, or prenuptial BFA, is a written legal contract couples who are already married may choose to enter that sets out the process of legal separation and property division following the end of the marriage in the event of divorce, separation or death.
Most importantly, a post-nuptial agreement sets out the financial contributions to the marriage, the assets of each spouse and the agreed division of these following the end of the union.
What effect will a post-nuptial BFA have?
If a post-nuptial BFA correctly complies with the appropriate provisions of the Family Law Act 1975, the document will be legally bind the signatories to the agreed procedure set out in the document.
There are provisions with the Act that address BFAs involving fraud, impracticality, unenforceability, changes in circumstances, unconscionable conduct and superannuation concerns. Under the Act, BFAs involving any of these considerations may be set aside by a court.
Why should married persons consider a post-nuptial BFA?
Recent divorce rates show one in two marriages fail, with Western Australia further affected by higher rates of marital breakdown associated with Fly-In Fly-Out (FIFO) work. The assurance of certainty in difficult times for married persons may provide a clear platform for couples to focus on resolving relationship problems without the often detrimental distraction of posturing to each other over settlement matters.
Moreover, certainty as to the procedure and division of assets following the end of a marriage removes the financial, time and emotional cost associated with the legal process of divorce.
In the event of a spouse’s death where no legal will has been executed, a postnuptial BFA can offer clarity and direction to the family when appropriating the deceased’s estate.
Where a post-nuptial BFA may be unsuitable
Where married persons are experiencing work, family or other uncertainty making midterm predictions unclear, the rigidity of a contractual BFA may not suit the future endeavours of the married persons.
Before engaging in any contractual agreement, here a post-nuptial BFA, it is of paramount importance each individual assesses whether this is the correct course of action for them.