What is a Binding Financial Agreement?
A Binding Financial Agreement or BFA (sometimes referred to colloquially as a prenup) is a private written agreement that details how a couple will divide their assets and liabilities following the breakdown of a relationship. For the BFA to be legally binding, each party must obtain independent legal advice before they sign. A BFA does not cover parenting arrangements or child support.
Why should I consider getting a binding financial agreement?
- You have been through a previous separation or dispute about financial issues and do not wish to repeat the experience.
- You have worked hard to accumulate your assets and you do not want to put them at risk if your relationship breaks down.
- You are starting a new relationship and want some certainty about what happens if, for whatever reason, the relationship breaks down.
- You both want some clarity about how you will manage your financial affairs during the relationship.
- You and your partner may want to acquire assets together in the future and want to set out how those joint assets are to be divided if the relationship breaks down.
- You are the recipient of inheritance and want to quarantine that inheritance if your relationship breaks down.
- You are a parent who has made substantial gifts of monies or trust distributions to your child who is about to enter a relationship and you want to safeguard those gifts of monies if your child’s relationship breaks down.
- You and your partner are attempting to make your relationship work but there is the possibility you may separate, and you want to agree on how to divide your assets if you separate.
- You and your partner have separated and want to continue to hold onto certain joint assets but split other assets because it is financially beneficial for both of you not to cut your financial ties.
- You and your partner have separated and want to keep the terms of your property settlement confidential.
When can I get a BFA?
Contrary to popular belief, a BFA does not have to be entered into prior to marriage. Couples in Perth and Australia can legally enter into a BFA at any time of a relationship including de facto couples. You can enter a BFA before the commencement of a relationship, during a relationship, or at the end of a relationship.
What does a binding financial agreement cover?
The scope of a BFA covers your existing assets and liabilities and future assets and liabilities. The scope of a BFA may also cover spousal maintenance.
Do the terms have to be fair?
Generally, the terms of a BFA will usually be one-sided in favour of the party who has the greater financial resources. A BFA can be unfair in that sense. However, the terms of a BFA cannot be so unfair so as to invite the Family Court to find a means to try and set aside it. Your lawyer should be able to advise you whether the terms of the BFA are so unfair that it makes it susceptible to being set aside by the Family Court.
Are binding financial agreements really binding?
Yes. For a BFA to be effective, each party must have obtained independent legal advice regarding the advantages and disadvantages of the proposed agreement. The independent legal advice cannot be given by the same lawyer and should not be given by lawyers working for the same firm. Once properly executed, a BFA is a binding and legally enforceable document.
Additional precautions will be required if one of the parties is not proficient in the English language or unfamiliar with Australia.
Can a binding financial agreement be updated?
No. You cannot vary the terms of a BFA except by terminating the earlier BFA and entering into a new one. The termination of an earlier BFA requires each party to obtain independent legal advice. Generally speaking, a properly considered BFA will attempt to consider reasonably foreseeable life changes such as the birth of children.
Importantly, the BFA needs to consider foreseeable life changes but at the same time remain enforceable despite all the unwelcome changes in circumstances that may occur in life.
What about if I am concerned about continuing financial support for our children?
You can enter a private agreement regarding financial support for children in a document called a Binding Child Support Agreement (BCSA). Similar to a BFA, a BCSA requires both parties to obtain independent legal advice. You can have a BFA sit alongside a BCSA.
How much does a binding financial agreement cost?
The costs involved in getting a BFA depend upon your individual circumstances and what it is you want to achieve. Some BFAs are relatively straightforward while others are considerably more complex. There is no such thing as a simple BFA.
A BFA is a complex legal document that needs to be drafted by a senior lawyer and tailored to your specific needs. It is not a document which can simply be downloaded from the internet and filled out. Our family lawyers will take clear instructions as to what you are trying to achieve.
If your partner is of limited financial means, you may also need to factor in the cost of paying for your partner to obtain their own independent legal advice. The costs involved in drafting a BFA are far less than litigating your financial matters after separation.
How can our family lawyers help?
We have been assisting individuals and families for over 100 years, with offices in Perth, Joondalup, Mandurah, Bunbury and Albany. Our family lawyers have the resources, experience, and expertise to help you draft an enforceable BFA. For more information about how we can assist you, or arrange a confidential discussion, please visit our contact page to submit an enquiry or reach out to your preferred office directly.
A BFA cannot be ignored because it removes a property settlement matter from the Family Court’s jurisdiction. If you separate and you agree to a property settlement which is different from the terms of the BFA, you and your partner need to terminate the existing BFA.
A BFA can be set aside if there has been a failure to comply with the legal formalities. This could include the receipt of legal advice or whether the circumstances at the time of signing suggest that the consent of one of the parties was not entirely voluntary or the terms were so one-sided in favour of one party as to be unconscionable. When a BFA is drafted, the lawyer will always aim to eliminate possible grounds for one of the parties to set aside the BFA in the future.
It is important that after you sign a BFA that you do not simply file it away and forget about it. Any financial transactions undertaken after the BFA is signed should have regard to the terms of the BFA. If parties act in a manner which is inconsistent with the terms of the BFA it may arguably be a basis to set aside the BFA on the grounds that the parties, by their conduct, evidenced an intention not to be bound by the terms of the BFA.